Reproduced by Natalino Caruana De Brincat – Article and conclusions from Workplace Report No195 published in December 2020
The claimant in this case, Jessica Varnish, is a professional track cyclist. She entered into a written agreement with not-for-profit organisation British Cycling, under which she was promised, among other things, to “train hard for the common purpose of winning medals for the British cycling team”.
The agreement expressly stated that it was not a contract of employment and did not create an employment relationship. Under the agreement, Varnish accepted a very high level of control. In return, she got a package of benefits, including coaching support, travel, access to facilities and so on, value around £600,000 to £700,000 spread over four years. The training was funded by grants from the National Lottery and Sports England.
Varnish’s contract was not renewed in 2016. She issued employment tribunal (ET) proceedings, alleging that this was an act of unfair dismissal and discrimination. Varnish did not argue before the ET that the agreement she had entered into was in any way a sham.
To rule on her claims, the ET first had to decide whether she was an employee or worker, that is, her “employment status”. If she were neither of these, she would have no work or employment rights.
The ET applied the established test set out in the case of Ready Mixed Contract 2 QB 497. Under this test, the minimum that a claimant must show to prove that they have employee status is mutuality of obligation, control and personal performance. If all three are present, the ET must then step back and look at the whole picture to decide whether the relationship is consistent with employment.
After reviewing the agreement, the ET concluded that there was no mutuality obligation in this case. The phase “mutuality of obligation”, said the ET, is shorthand for saying there must be an obligation under the agreement to provide some work in return for wages, known in shorthand as the work/wage bargain. Varnish was not working in return for a wage, said the ET. British Cycling did not provide “work” for Varnish and pay her a “wage” for doing that work. Instead, she agreed to train, funded by public funds, in accordance with her individual rider plan agreed with British Cycling, in the hope of success in international competition. The ET accepted that there can be cases where an employee works in return for something other than traditional “money” wages. However, this was not one of those cases.
Next the ET considered the need for Varnish to demonstrate a legal obligation to provide personal performance under the agreement. The ET began by acknowledging that this agreement required Varnish to train.And clearly, she could not send a substitute. However, since the ET had already concluded that Varnish was not performing “work” in return for “wages”, her training could not qualify as personal performance in the sense required by an employment contract.
Next, the ET turned to the requirement for the claimant to demonstrate evidence of control. The ET accepted that Varnish was subject to a great deal of control by British Cycling under the terms of the agreement. However, this alone was not enough to turn her into an employee or worker, given the lack of both mutuality of obligation and personal performance.
As acknowledged by Varnish, this agreement, said the ET, was real, and not a sham. It reflects the genuine obligations agreed by the parties.
Finally, the ET applied the last element of the Ready Mix Concrete test which was to step back and look at the whole picture of relationship. Having done this, the ET concluded that this relationship was “wholly inconsistent” with either a contract of employment or a worker contract. Varnish was neither an employee nor a worker. She appealed.
The Employment Appeal Tribunal (EAT) began by noting that an Appeal Court must only rarely interfere with an ET’s ruling as to a claimant’s employment status. This is because it is the ET’s job to test all the factual evidence, including through cross-examination of witnesses, by looking at the whole picture to reach its conclusion. An EAT can only interfere with an ET’s ruling on this issue if the ET has reached a conclusion that no reasonable ET could have reached. This ET took the correct approach, said the EAT, by weighing up all the competing factors in favour of and against employment status and then looking at the whole picture before reaching its conclusion.
The starting point of every analysis into employment status, it said, should be to acknowledge that employees are often in a weaker bargaining position than their employer. The lack of an ability to negotiate individual terms that result from this inequality of bargaining power will normally point towards rather than away from employee status. However, this is only one factor to consider when building the whole picture. And in any event, in this case the ET was entitled to conclude that Varnish had the bargaining power to attempt to negotiate at least some sort of agreement. The bargaining power between these parties was not entirely unequal.
In addition, there was nothing wrong with the ET’s conclusion that Varnish’s training obligation under the agreement were not “work” and that the benefits provided by agreements were not “remuneration” or “wages”. As a result, her claim must fail.
This does not mean, said the EAT, that in another case, with a different contractual arrangement, training by a cyclist can never amount to “work” in return for “wages”. What matters is the specific contractual arrangements in each case. It is the ET’s role to hear all the evidence and to decide whether each specific agreement amounts to a “work/wage” bargain.
In the course of their judgement, the EAT also commented on something known as the “dominant purpose” test. This is where the ET searches for the dominant purpose of a contract to decide whether the relationship it creates is one of employment. This is a useful test, said the EAT, to help decide whether a contract belongs in the world of work / employment. Examples of contracts whose dominant purpose is outside the world of work and therefore do not give rise to work rights might be contracts for education training, said the EAT. The fact that the main purpose of a contract is outside the world of work is a factor an ET can legitimately take into account to decide whether someone is an employee, worker, or neither – even if, as in this case, the contract creates obligations to provide personal service. However, it always depends on the specific facts of each case.
There was nothing wrong with the ET’s conclusion in this case that the use of public funds to provide coaching and lack of wages of British Cycling to Varnish were inconsistent with her being either an employee or worker, so her claim failed.
Employee status law in the UK is far too complicated. This ruling at least spells out three things. First, it is a reminder that the phrase “mutuality of obligations” is shorthand for obligations to provide work in return for (usually but not always money) wages, that is, the “work/wage bargain”.
Second, in most cases (although not in this one), the unequal bargaining power in the employment relationship and the resultant inability to negotiate the written contract terms will normally point towards a work/employment relationship.
Third, although it will be fairly obvious that whether a relationship belongs in the world of work, in peripheral cases like this one, it may be useful to ask what the “dominant purpose” of the contract is, to help decide whether it generates worker rights.
Varinish vs British Cycling Federation – British Cycling (2020) UKEAT/0022/20/LA
Article and conclusions from Workplace Report No195 published in December 2020