Sport and employment law – the year in review 2018/19

Published 29 May 2019 By: Andrew Smith

Cycling Track

As 2018 drew to a close, over five days in Manchester, the Employment Tribunal heard detailed evidence and submissions in the dispute between the British cyclist, Jess Varnish, and British Cycling and UK Sport. Given the importance of the case, this review focuses on analysing the arguments and decision of the Tribunal regarding the question of whether elite British cyclists have employment rights.

Whilst each case will necessarily turn on its own facts, the reasoning of the Tribunal in the Varnish case is likely to have ramifications beyond the sport of cycling, given its analysis of various matters including the applicable funding arrangements. A copy of the judgment is available to view here.1

The issues

The preliminary issues for the Tribunal to determine were, in summary:

  1. whether Varnish was an employee or a worker of British Cycling or UK Sport, as defined by the relevant provisions of the Employment Rights Act 1996 (the ERA) and the Equality Act 2010 (the EqA); and

  1. which of the substantive claims brought by Varnish, if any, the Tribunal had jurisdiction to determine at a final hearing.

Varnish’s claim of unfair dismissal could only proceed if the Tribunal was satisfied that she was an "employee" of one or both respondents; her other claims of sex discrimination, victimisation and whistleblowing detriment would be permitted to proceed if the Tribunal was satisfied that she was an employee or a "worker". Employees are individuals who work pursuant to a contract of employment, which in broad terms requires three key elements: (i) an obligation to perform work personally; (ii) mutuality of obligation – i.e. an obligation on the employer to provide work, and an obligation on the individual to carry it out; and (iii) the employer having a sufficient degree of control over the individual so as to render it an employee/employer relationship. In considering the question of employment status, the Tribunal will consider whether the various provisions of the contract are consistent with its being a contract of employment, and will scrutinise the practical reality of the parties’ relationship.

In order to be a "worker", in broad terms an individual must be engaged under a contract whereby they undertake personally to perform work or services as part of a profession or business undertaking carried on by someone else. Amongst the differences between these two categories of "employment status", the high degree of control that is a prerequisite for an employer/employee relationship is not necessary for an individual to be regarded as a worker.

The Tribunal reserved its judgment in the Varnish case and the outcome was communicated to the parties in the New Year. Employment Judge Ross held that Varnish had not established the requisite employment status for any of her claims, which were accordingly dismissed. According to recent media reports, Varnish has lodged an appeal against this ruling with the Employment Appeal Tribunal.2

Why did the Tribunal conclude that Varnish was not an employee of British Cycling or UK Sport?

On the facts, the Tribunal found that there was no “mutuality of obligation” or “wage/work bargain”, which is an “irreducible minimum” for the existence of an employer/employee relationship. In other words, the Tribunal concluded that there was no obligation on the part of British Cycling or UK Sport to offer work to Varnish, and no corresponding obligation the part of Varnish to accept and perform work, in exchange for payment.

The Tribunal characterised the relationship between Varnish and British Cycling as follows (at para. 141):

What occurred was that the claimant was selected, on the basis of her potential, to take part in the first respondent’s World Class Programme (also referred to as the Podium Programme). By 2015 she was taking part at the elite level on the Olympic Podium Programme. This was reflected in the legal agreement, the Athlete Agreement. The purpose of the Agreement was ‘to recognise the ultimate goal of everyone involved in the Podium Programme to win medals for the British Team at international competitions’…

In the Tribunal’s judgment, what Varnish had agreed to do was “to train in the hope she would be selected to compete for the British Cycling Team” (para. 142). This was a commitment of a different character to that which is involved in an employment relationship. For its part, British Cycling had “offered [Varnish] extensive services…although she was not obliged to take up those services” – for example, Varnish could choose to use her own coach if she so wished.

With regard to the financial arrangements, Varnish was not paid by British Cycling; rather she was “eligible as an athlete who has been selected for British Cycling’s Podium Programme to apply for a National Lottery funded Athlete Performance Award (APA) which I find was a non repayable means tested grant and thus a contribution towards her living and/or sporting costs as an elite athlete” (para. 144, underlining added). This was of a different character to a salary or wages. Varnish was not compelled to apply for the APA; she was not guaranteed to receive such an award (with UK Sport retaining an inherent discretion to reject an application, e.g. having regard to an athlete’s means); and another feature of the award was that it was variable (based not on her past efforts and achievements but on the assessment of her future potential).

Furthermore, the Tribunal rejected a submission that the services provided to Varnish by British Cycling (including, for example, coaching support, sport science support and medical services) constituted remuneration; rather, they were benefits and not "pay".

In all the circumstances, the Tribunal held that Varnish “was not providing work or skill in consideration for wages or remuneration, for [British Cycling]” (para. 151).

In the absence of mutuality of obligation, Varnish’s claim that she was an employee of British Cycling failed at the first hurdle. Notwithstanding this, the Tribunal went on to consider the other components necessary for a contract of employment, namely (a) personal performance, and (b) (sufficient) control exercised by the putative employer over the individual.

With regard to the matter of personal performance, the Tribunal held that:

  1. superficially, it appeared that the “category of personal performance here is consistent with a contract of employment” (para. 156);

  1. there was no power of substitution, and it was “inevitable that it was [Varnish] who must train in accordance with the rider plan”;

  1. however, upon a closer analysis, Varnish was not “personally performing work provided by the respondent” (para. 157, underlining added);

  1. rather, she was “personally performing a commitment to train in accordance with the individual rider agreement in the hope of achieving success at international competitions” (para. 157); and

  1. this did not amount to personal performance consistent with a finding of a contract of employment.

With regard to the question of control, the Tribunal held that:

  1. this was a “significant feature” of the relationship between Varnish and British Cycling (para. 158);

  1. …many aspects of her life including what she ate [and] how, when and where she trained were closely controlled by British Cycling” (para. 159);

  1. Varnish was sometimes restricted in terms of taking time off, having regard to her training calendar;

  1. Varnish was subject to control in respect of her media image and appearances; and

  1. Varnish was restricted in terms of her personal commercial work.

However, in light of the Tribunal’s other findings, these elements of control were not sufficient to give rise to a relationship of employer/employee between Varnish and British Cycling.

The Tribunal further concluded that the terms of the Athlete Agreement (which included the statement “We both acknowledge this is not a contract of employment”) accurately reflected the true arrangements between the parties, and that any inequality in bargaining power had been ameliorated by Varnish’s opportunity to obtain advice on the agreement.

As regards other factors that could have been relevant to the question of employment status, had the Tribunal reached a different conclusion on the question of mutuality of obligation, the Tribunal found that:

  1. whilst athletes such as Varnish would generally wish to use the state of the art equipment provided to them, they were not obliged to do so;

  1. although British Cycling’s Disciplinary and Grievance Policy was directed at athletes and therefore consistent with employee status, other policies (such as the Equality Policy) applied to all members (including the elite athletes, who were obliged to be members of British Cycling), which pointed against employee status;

  1. Varnish’s inability to negotiate individual terms of her agreement with British Cycling was inconsistent with a finding of employee status;

  1. Varnish was responsible for her own tax and financial affairs, which was inconsistent with employee status;

  1. the benefits which Varnish could choose to receive under the World Class Programme were not regarded as taxable by HMRC, which pointed against employee status;

  1. Varnish was in business on her own account, having set up her own company, Jess Varnish Management Limited. In her evidence to the Tribunal, Varnish explained that she saw herself as a brand, and had entered into commercial sponsorship arrangements with Boots and Adidas in particular. Again, these matters pointed away from employee status;

  1. a matter pointing towards employee status was the degree to which Varnish was integrated into British Cycling’s organisation, working closely with her coach, wearing the team clothing and training at the Manchester velodrome; and

  1. the restrictions on how Varnish could communicate with the media, and her obligation to attend a certain number of contractual appearances on behalf of British Cycling, were factors pointing towards employee status.

At paras. 228-231 of the judgment, the Tribunal summarised its reasons for rejecting Varnish’s contention that she had been an employee of British Cycling:

228. At this point I step back and look at the whole picture as advised by Mr Justice Mummery.3 The claimant was an athlete. She wished to perform to the best of her ability and to represent her country at international competitions. British Cycling wanted to assist athletes who could perform in international competitions at the highest level and win medals. British Cycling selected the claimant for their Podium Programme. She agreed to participate in a detailed training plan. To support her in her training they offered her state-of-the-art equipment and a range of services to which she could avail herself should she wish.

229. The cost of providing these services by British Cycling was met partly from public funds (the National Lottery) and partly from funds raised by commercial sponsorship. The claimant was restricted in terms of her own commercial sponsorship and media appearances.

230. The claimant received no money from the first respondent and could choose her own coach if she wished. She could choose her own equipment in certain circumstances if she wished. The money she did receive was from another party, UK Sport, was a non repayable grant and was not based on past “work” but rather on her future potential. It was means tested and variable.

231. I find the picture wholly inconsistent with a contract of employment with the first respondent. I find she was not employed by the first respondent.

Having first focused on the relationship between Varnish and British Cycling, the Tribunal went on to reject Varnish’s contention that she had been an employee of UK Sport, holding that:

  1. UK Sport was “purely a funding body providing [a] tax fee grant to [Varnish], exactly as she agreed in evidence”, and as reflected in the written Funding Agreement (para. 268);

  1. UK Sport retained a discretion to reject an application for an APA;

  1. Varnish “agreed that she had no day-to-day relationship with UK Sport” (para. 271);

  1. UK Sport did not control Varnish’s training and does not provide facilities or equipment for athletes;

  1. the only commitments on the part of an athlete under the APA concern an agreement relating to the use of their image, and the carrying out of a maximum of three appearance days each year (for the benefit of the National Lottery, rather than for UK Sport). In any event, Varnish could not recall ever having appeared for the National Lottery and UK Sport had no record of such an occurrence;

  1. there was no mutuality of obligation, or wage/work bargain, between Varnish and UK Sport – the latter did not provide the former with work;

  1. rather, Varnish was “simply provided with a tax free grant to enable her to fulfil her dreams as an athlete” (para. 274);

  1. save for the isolated provision in relation to appearances for the National Lottery, UK Sport had no control over Varnish;

  1. the written terms of the APA accurately reflected the reality of the parties’ relationship, which was “essentially a funding arrangement” (para. 278); and

  1. it was “factually incorrect to state [that UK Sport] delegated the running of the World Class Programme wot British Cycling” (para. 281); rather, UK Sport was “best described as advising, guiding, supporting and monitoring British Cycling, as it does with Governing Bodies of other sports” (para. 282).

The Tribunal also rejected a submission from Varnish’s representatives that the proper legal analysis of the factual position was a “tripartite arrangement whereby different elements of the employer role were fulfilled by each respondent” (para. 181). The Tribunal held that “Although there was a close relationship between UK Sport and British Cycling, as there is with many other sporting Governing Bodies in terms of funding and forward planning of that funding I am satisfied there is nothing to suggest any sort of ‘tripartite arrangement’ in the sense UK Sport and British Cycling both acted as the employer” (para. 188).

The Tribunal summed up what it considered to be the true nature and character of the parties’ relationship as follows (at para. 192):

The claimant was training as an athlete, an elite sprint cyclist in the hope she would be selected to represent Great Britain in international competitions. She was not working for either the first or the second respondent or both of them under a tripartite arrangement. She was receiving a non-repayable publicly funded grant from the second respondent to enable her to pay her living expenses so she could have the best chance of focussing on her training, without the need to take a job. She was receiving benefits and services from the first respondent to enable to have the best chance to achieve her goal of being selected to compete at the highest level.

Why did the Tribunal conclude that Varnish was not a worker of British Cycling or UK Sport?

The term "worker" is more widely defined than that of "employee", but Varnish again failed to persuade the Tribunal that she satisfied the statutory requirements for worker status, whether under the ERA or EqA definitions. In rejecting this aspect of Varnish’s claim against British Cycling, the Tribunal held that:

  1. by reference to its earlier findings, there was no mutuality of obligation between the parties;

  1. there was no minimum amount of work that Varnish was obliged personally to perform; rather, the Tribunal reiterated that she was “training in accordance with the rider plan in the hope she would be selected to compete in international competitions” (para. 242);

  1. the Athlete Agreement is a contract “where services are provided to [Varnish], not the other way round” (para. 245), and the purpose of the contract was training;

  1. the analogy with education providers, as submitted by the respondents’ representatives, was helpful. In this regard, “the relationship between [Varnish] and [British Cycling] is much more akin to the relationship between an Institute of Higher Education such as a University where education including teaching, lecturing and other services, is provided to the student”, and the funding provided to Varnish was “analogous to a grant” (para. 257),

  1. no wages were paid to Varnish by British Cycling and, in relation to the various services/benefits made available to her, it was “very difficult to understand how the mechanism of Part II [of the ERA] in relation to [unauthorised deductions from] wages could apply” (para. 247); and

  1. the dominant purpose of the Athlete Agreement was to win medals for the British Team, and to enable Varnish “to be the best athlete she could possibly be” (para. 257).

With regard to this aspect of Varnish’s claim against UK Sport, the Tribunal held that:

  1. there was no mutuality of obligation and, indeed, no personal performance of work by Varnish for UK Sport;

  1. Varnish had “no ongoing relationship with UK Sport” (para. 288);

  1. save for the limited appearances obligation (which was for the benefit of a third party, the National Lottery), the “only other restraints on [Varnish] were to ensure that public money was used appropriately, for example, there were provisions about anti-doping and gambling in the Agreement” (para. 276);

  1. its findings were “wholly inconsistent” with a finding that Varnish “undertakes to do or perform personally any work or services for another party to the contract” (para. 290);

  1. on the evidence before the Tribunal, “the nature of the relationship between [Varnish] and UK Sport was essentially the provision of a tax free grant to cover her living expenses in order to allow her to focus on training as an athlete and maximise her chances of competing in international competitions and winning medals” (para. 291);

  1. it was also the case that UK Sport imposed no restrictions relating to work or employment by athletes, save in respect of a means test for the APA. Cyclists may, for example, be contracted to a professional road cycling team; and other athletes may be employed by other employers, such as the Armed Forces; and

  1. in summary, “the relationship…between [Varnish] and UK Sport is a financial arrangement which is wholly consistent with a grant, given the nature of the funding” (para. 295).

Could Varnish have brought a sex discrimination claim in a different forum?

It necessarily followed from the Tribunal’s findings on the question of employment status that Varnish’s underlying claims fell to be dismissed for want of jurisdiction.

The Tribunal did note, however, that “as someone having the benefit of services under the Athlete Agreement, the claimant would have been able to bring a claim against [British Cycling] under section 29 Equality Act in the County Court on the basis it was a service provider” (para. 259). What Varnish was not permitted to do was to pursue a discrimination claim in the Tribunal under the work provisions of the EqA.

The appeal to the EAT

In relation to Varnish’s appeal against the Tribunal’s judgment, her Solicitor has been reported as stating that “the tribunal was wrong on a number of counts, including in how it found the services and benefits she received from British Cycling were not remuneration; and how it ‘failed to explain how the work performed by a professional football player is different from the work performed by Jess for British Cycling’.4 Employment and sports lawyers await the response of the EAT with interest.

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Andrew Smith

Andrew Smith

Andrew is a barrister practising from Matrix Chambers in London. He is an employment law specialist, and has a keen interest in sports law and sport generally. His Matrix profile (including Directory recommendations) may be viewed here.

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