If you think you are having a hard day at work, spare a thought for those at Manchester City Football Club.
An independent commission appointed by the Premier League recently issued its verdict, finding Manchester City Football Club guilty on 114 charges relating to breaches of the Premier League’s financial rules between 2009 and 2018, sending shockwaves through world sport. Management, players, staff and fans are coming to terms with what these findings may mean for their club.
In this article, we take a light-hearted look at some of the key employment themes emerging from the saga, with an Irish employment law lens.
A star-studded exodus: will Haaland et al walk?
The first question is what the club’s superstar players such as Erling Haaland et al may make of arrangements: will they stay or will they go, and what will it cost them?
Most large employers (and they don’t come much bigger than Manchester City) ensure very strong protections are in place if a key employee leaves the business: but could City’s star-studded squad have any remedies as employees, such as being able to argue that the club’s conduct allows them to terminate their employment contracts and move elsewhere, even if they have such contractual restrictions?
A player could draw parallels with the case of Malik & Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, a decision which has been followed by the Irish Superior Courts, where the House of Lords established that employment contracts contain an implied term of mutual trust and confidence.
In that case, regulators became aware that the bank’s business had for a number of years been carried on fraudulently. Two employees were terminated on grounds of redundancy and neither were able to obtain employment in the financial services industry because of stigma attaching to them as former employees of the bank notwithstanding their innocence of any wrongdoing. The House of Lords held that there is an obligation on any employer to not carry on a dishonest or corrupt business. They also held that if it could be shown that it was reasonably foreseeable that a consequence of such corruption was a serious possibility that an employee’s future employment prospects would be greatly impacted, then damages were recoverable for such continuing financial losses.
Malik has a range of permutations in this context: on the one hand, one could argue that the conduct of Manchester City has the effect of seriously damaging trust and confidence. On the other, the club could argue that the allegations have been in the public domain for many years, so players signed up to terms in full knowledge that this was a potential outcome.
The message for Irish employers is that objectively poor conduct can give rise to them losing their best people to rivals, notwithstanding contractual protections such as post-termination restrictions. As for Manchester City, at this point in time, the possibility of the star quality of the likes of Erling Haaland, Rayan Cherki and Gianluigi Donnarumma being diminished by the stigma of this case appears remote.
Money for nothing: Do the players have a claim?
Hypothetically, if Manchester City were based in Ireland, could the players go further than merely leaving the club, and sue before the Workplace Relations Commission?
In our “Irish City” hypothetical, players could resign and potentially argue that they have been constructively dismissed based on a fundamental breach of their employment contract or due to the behaviour of the club. To succeed in these claims, players would need to prove that it was reasonable in all the circumstances for them to have terminated their contract of employment; the core test applied is to ask (i) whether the employer has committed a fundamental breach of the employment contract or; (ii) whether the employer’s conduct has been so unreasonable that the employee could not be expected to tolerate it and had no alternative but to resign.
The argument may be more convincing for the players with long service who have been with the club since before this investigation, as opposed to those who signed their contracts when there was already a cloud of suspicion and an investigation underway.
In Ireland, the remedies for constructive dismissal are the same as those under the Unfair Dismissals Act, which is up to two years’ remuneration. However, employees also have a duty to mitigate their losses and so, there would be an onus on the players to find new employment quickly.
Based on the talent on the books at the club, one would imagine this wouldn’t be an issue for any player, which would impact their prospects of recovering damages. In short – a good career move for a player could result in them scoring an own goal in the Workplace Relations Commission.
“Sham deals”: The employee / contractor conundrum
One of the most striking findings from an employment law perspective was how Manchester City structured payments to certain people, and the impact this had from a misclassification perspective.
The commission found that a significant portion of the money paid to certain individuals in return for services was not recorded as money under employment contracts between the club and the individual, but was instead recorded in separate consultancy agreements between those individuals and other third party entities. This meant that some employees had a portion of their pay (as high as £8.866 million in one case) routed through separate “side deals” that ran alongside their employment contract,. The commission described these arrangements as “shams” which did not reflect the economic reality of the arrangements.
Under Irish law, it is critical to identify the nature of the services provided by an individual, and whether they should properly be classified as an employee or otherwise: failure to do so could give rise to tax and social security liabilities, as well as allegations of breaching statutory employment rights.
The key test for determining whether a relationship is one of genuine independent contractor or is in fact an employee relationship, is the five-stage sequential test established by the Supreme Court in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza [2023] IESC 24 and further details of that decision can be found here. Critically, the label “independent contractor” in any contract is not determinative. Irish courts and the WRC will look at the reality of the working relationship in practice and this is the basis of the framework set out in Karshan.
The Manchester City decision underscores the importance of employers ensuring that the substance of its arrangements consistently reflects each of the factors set out in Karshan to mitigate the risk of contractors being misclassified as employees and vice versa.
Down to penalties
While any talk of potential punishments is currently only speculation, the powers available to the Commission are broad. Hefty fines, stripping of titles and even relegation are all live possibilities as the Commission is entitled to impose such penalties as it sees fit.
In 2006, Italian football giants Juventus were fined, stripped of previous titles, stung with heavy points deductions and, relegated to Serie B. The prospect that fixtures against Liverpool FC and Chelsea FC may become journeys to Lincoln City FC or Grimsby Town FC may cause players to fight to escape their contracts and look for pastures new, which could potentially cost the club millions in lost transfer fees to compound the lost television and sponsorship revenue.
Such losses in revenue can be disastrous for sporting organisations. In recent times, Munster Rugby commenced a collective redundancy process due to shortfalls in revenue partly caused by the team’s failure to reach the business end of European competitions. Without the revenue generated by these big-ticket fixtures, the club was unable to balance its books. In Manchester City’s case, points deductions and relegations may cause them to suffer a similar fate: in recent years, redundancy processes of other Premier League clubs have typically focused on support staff rather than those on the pitch.
For Irish employers facing fundamental challenges to carrying on a previous business model in changed circumstances, redundancy can be a fair reason to dismiss an employee, provided there is a genuine reason for the redundancy and a fair process is followed. Additional obligations can arise if applicable collective redundancy thresholds are triggered. If Manchester City had to face this question in the Irish context, we would expect them to prepare carefully to ensure that any redundancy process could withstand scrutiny before the Workplace Relations Commission.
Full-time analysis
The issues of worker misclassification and breach of contract are not confined to the rarefied world of Premier League football. They are live issues which Irish employers across all sectors confront on a daily basis.
Transparency and compliance are not optional extras. The WRC and the Irish courts have demonstrated a consistent willingness to look beyond the contractual label and examine the reality of the working relationship.
Whether you are managing a squad of multi-million-pound footballers or a team of ten employees, the fundamentals of good employment practice remain the same: get the basics right, and do not wait for a crisis to discover what your obligations are.
Contact us
Matheson’s Employment, Pensions and Benefits Group is available to guide you through navigating employment law claims in Ireland, so please do reach out to our team or your usual Matheson contact.
