1 April 2020 Nick Marshall SportingLinks

Benched: How UK sports stars could be furloughed because of Covid-19

The UK tax authority (HMRC) announced further details of the UK Government’s temporary Job Retention Scheme (JRS) on 26 March. Surprisingly, it could mean that British taxpayers pick up (at least some of) the wage bill for the country’s biggest sports stars.

The purpose of the JRS

The JRS is intended to support businesses that have been “severely affected” by, and no longer need employees during, the Covid-19 pandemic. If employers meet the criteria for the JRS, they can designate employees as being “furloughed” (or on “furlough leave”) – effectively, those employees are kept on the payroll, but are not working.

With leagues brought to an abrupt end and meets cancelled, this will be a welcome development for many employers across the sports sector. Premier League clubs Newcastle United and Tottenham Hotspur have already announced that they are putting some non-playing staff on furlough leave.

Are clubs and other employers eligible to claim?

The JRS has a low threshold for employer participation. The employer must:

  • be a UK organisation (including companies and charities)
  • have a UK bank account
  • have been operating a PAYE (i.e. employee tax collection) system on 28 February 2020

This means that many clubs, federations and other sports employers are likely to qualify.

Are sportspeople in scope?

There are no restrictions on qualifying professions in the JRS, nor on income levels. To be furloughed, an employee must have been:

  • employed (whether full-time or part-time, permanently or for a fixed term) on 28 February 2020
  • paid through the employer’s PAYE system
  • designated by their employer as being furloughed

This means that it is not only backroom staff that might be covered; some of the biggest names in sport could be furloughed.

However, where athletes are not employees, they will fall outside of the JRS. If such sportspeople are left without financial support during the Covid-19 pandemic, it is not difficult to see Employment Tribunal claims alleging that they are employees (and should have been, or that they were effectively, furloughed). Such claims are not without precedent – Jess Varnish, an ex-Team GB Olympic cyclist, unsuccessfully argued last year that she was an employee of UK Sport and British Cycling.

How much could employers claim back?

Employers can claim back:

  • 80% of an employee’s salary (as at 28 February 2020), up to a maximum of £2,500 per month
  • the cost of some employment taxes and statutory pension contributions

For many clubs, this could be a lifeline. Employers can also backdate the furlough leave to 1 March 2020, as long as all of the relevant criteria of the JRS are met.

HMRC expect the online portal for employers to make claims to be open at the end of April, and to be making payments to employers in a matter of weeks.

What are the other key restrictions?

Employees are not allowed to undertake any work for their employers whilst they are furloughed, so they will not be allowed, for example:

  • to train (whether in organised sessions together or, it seems, at home alone if this is part of their job). However, separating training required under an employment contract from general exercise which an individual is permitted to do, may be difficult (and even harder to prove)
  • to attend (virtual or in-person) meetings with coaches or management
  • to undertake employer-organised media appearances
  • to do admin or paperwork

The minimum period of furlough leave is three weeks.

Employers need to be particularly careful when designating their sportspeople as furloughed, and will need to seek specialist employment law advice to make sure that their proposals: (i) fall within the JRS; and (ii) do not breach existing UK employment law.

Will clubs and other employers claim?

It remains to be seen whether clubs and other employers in the sports sector will seek to claim back wage costs from HMRC. For clubs that were struggling financially before Covid-19, the JRS could prove to be a valuable lifeline, giving them a glimmer of hope at a time when games, meets and other sports events have been cancelled (with the obvious knock-on impact on ticket, merchandise and other match-day sales, which will cause cash flow problems for many organisations).

On the other hand, profitable clubs which claim taxpayers’ cash to pay wealthy sports stars risk a public backlash and reputational damage. In a time of acute national crisis, when public finances are likely to take a battering, many people will consider such an approach unconscionable (even if it is within the letter of the JRS). Employers will need ask themselves – could I justify this to our fans? If not, they should think twice about furloughing their athletes; just because they can, doesn’t mean they should.

For a view on how COVID-19 is pushing the boundaries of employment law in professional sports in the U.S., check out our blogpost here.