Professional athletes: Workers, business operators, or both? Sport as a possible hotbed for a new legal regime protecting freelancers’ rights | In Principle

Sport is an increasingly important sector of the economy. It is a significant contributor to GDP. It attracts massive capital investment and is a source of livelihood for many service providers and employees. Industrial relations in the sport sector are therefore subject to intensifying scrutiny, especially in jurisdictions where the sector is still developing and in the process of professionalisation. But sport-specific industrial relations also have certain peculiarities that make them intriguing in the discussion of employment market trends in the modern economy.

Blurring lines between employment and entrepreneurship

Industrial relations have traditionally been mostly bipolar, between industrialists (businesses owning capital necessary to build infrastructure for sourcing and utilising work) and employees (providers of work) (see ILO Working Paper No. 228 “Dependent self-employment: Trends, challenges and policy responses in the EU”). There have always been market participants who did not fit well into these two categories and functioned at their edges. Free professionals, especially from creative industries (actors, musicians, and so on), have never been typical representatives of either group. On one hand, like business operators, they are often masters of their own economic fate, independently steering their careers and professional development, freely choosing their clients, and most of the time working for a portfolio of clients. On the other hand, as in the case of workers, their economic activity consisted of their personal efforts and skill-set; they were often highly economically dependent on their major clients and worked in organised teams, under at least a certain degree of instruction and supervision.

This peculiar group is growing in number and economic importance, mainly due to technological changes facilitating coordination of work, allowing for the use of capital-intensive assets “as a service” and enabling almost costless direct contact with customers. This results in proliferation of genuine micro-businesses, but also leads to the growth of what is known as “dependent self-employment.” (see “The Rise of Independent Professionals” and “Investment Disputes in the Era of the Fourth Industrial Revolution”)

The term “dependent self-employment” does not have a single meaning. It is sometimes used to describe sham self-employment—an arrangement adopted merely to disguise regular employment to gain undue tax or other advantages. The term is also used, however, to describe a genuine borderline relationship, between a party providing certain work on a freelance “B2B” basis rather than under an employment contract, and the undertaking using this work and enjoying a position of significant economic power towards its supplier.

The need for a more nuanced approach

Dependent self-employment of the first kind is rightly considered misclassified employment and is subject to investigation, exposure and sanctions. But dependent self-employment of the second kind is a natural economic phenomenon, which should be respected and nurtured by the law, and requires a shift away from the law’s binary divide between employment and entrepreneurship.

Adherence to the traditional divide can have several unwanted consequences. It entails either putting the dependent self-employed into the box of business operators or reclassifying them as employees, with all the consequences in both instances.

The first solution could lead to depriving the dependent self-employed of certain guarantees which, regardless of their entrepreneurial status, are still called for given their factual situation, e.g. the right to collective bargaining. The second, overly restrictive approach could create unnecessary barriers and curb the mobility and ingenuity of which genuine dependent self-employment is a natural ramification. This could be particularly undesirable in markets like the EU, where a heavy-handed take on the issue by the authorities could impede market integration and cross-country mobility or discourage innovation, particularly in sectors where dependent self-employment and new business models that rely on it heavily play an important role (e.g. creative industries or IT startups).

The demand for a more nuanced approach is gradually being met with legislative efforts in some jurisdictions. Hybrid categories of industrial relations participants are being established in countries like Austria (see “Social protection rights of economically dependent self-employed workers,” 2013 Study by Policy Department A for Economic and Scientific Policy of the European Commission’s DG for Internal Policies). The problem is that the self-employed are a particularly diverse pack and won’t fit neatly into any easily identifiable third category, or any number of categories. As in all areas of disruptive change, a more principled, effects- based, rule-of-reason approach will be needed before more fixed categorisation criteria emerge from the experience of practical application of such an approach. The key role in this process will be played by the courts and law enforcement agencies. They will be required to look beyond the lex to derive new rules for the freelance economy from the ius in particular cases. Legislators can then follow suit.

Polish example

The symptoms of the shift from this bipolar divide can be seen in developments in Polish law from a few years ago.

In the judgment of 2 June 2015 (Case K 1/13), the Polish Constitutional Tribunal held that coalition rights must be granted to all those performing work, regardless of the formal character of their contract with the recipient of the work. The tribunal ruled that coalition rights cannot be limited to those who are parties to traditional employment contracts under the Labour Code. Importantly, however, the tribunal ruled that those who perform work on a self-employment basis are not necessarily self-employed only as a sham and subject to reclassification as employees. Instead, the tribunal noted that “work” and “worker” are broad concepts, especially in the modern economy, and under certain circumstances can apply to those who supply work in the form of services performed on their own account, in pursuit of a business, provided that they are in a situation in which their interests require union protection. The same stems from the National Labour Inspectorate Act, which expressly states that work can also be provided by the self-employed in pursuit of a business (Art. 13(1)). Clearly, therefore, under Polish law a person can be a business service provider and supply his or her work as a business operator, but still be in a position of economic dependence and subordination towards a major customer—the recipient of the work—and require protection akin to that granted by the law to an employee.

In the judgment referred to above, the Constitutional Tribunal noted that as a matter of the Polish Constitution and human rights, such persons must be provided the right to unite to take part in industrial dialogue on an equal footing. Since the statutory law in Poland currently only provides for such participation to take place through labour unions, the rules on creation of unions must be appropriately broad and flexible, the tribunal decided.

Naturally, this is just the first step in the inquiry. The legislature must also ensure that the regulations concerning the powers, organisation and operations of labour unions make them an effective vehicle for the exercise of coalition rights also by “self-employed workers.” This may require a reform of the labour union laws (e.g. providing them with the right to bring claims on behalf of “workers” also in cases not concerning traditional employment contracts, as the law currently stands) or furnishing other organisations (e.g. freelancer professional associations or “communities of practice”) with rights comparable to those of trade unions, also enabling them to take part in industrial dialogue. The Constitutional Tribunal has not yet been called upon to decide whether Polish law can also stand the relevant tests in this regard.

It also remains to be seen what other social protection rights will be extended to the dependent self-employed.

Sport sector as the possible hotbed for a new regime

There is one sector in particular which in my opinion encapsulates all of the problems and difficult issues associated with the rise of dependent self-employment. It is the sports sector.

A professional athlete does not really strike one as a typical worker. The most publicly visible representatives of the group are in fact frontmen for multimillion-dollar marketing enterprises. Professional athletes are an extremely diverse pack, however, which paradoxically makes them, as a group, very representative of the dependent self-employed. And at the end of the day, they all make a living out of the physical work of their own hands, they work in teams and under strict instructions from powerful organisations, and they can suffer the same violations and abuses from clubs and sport federations as workers do from their employers. But at the same time, like business operators, professional athletes in their striving for success and professional development are all individualist, rather than collectivist, and value freedom, competition and opportunity over security and stability.

Regulators should therefore look closely to highly developed sports markets for clues on how to tackle the regulatory problems of dependent self-employment.

Organisations of professional athletes in countries like the US can serve as a blueprint for how organisations of self-employed workers should be built and empowered by the law. Professional athletes in those jurisdictions are workers, but in the broad sense of the word. They are, in fact, also independent professionals, often pursuing their sports as part of major business operations, but still economically subordinated to economically powerful sport organisations such as leagues and clubs. Their organisations are therefore more akin to professional membership associations, which makes them more suitable to their members’ individual rather than collective needs. This does not change the fact, however, that they have traditional union prerogatives, such as the right to engage in collective bargaining and to pursue the legitimate interests of their members collectively where justified.

Grievance mechanisms and salary guarantee schemes run by players’ organisations and leagues could serve as models for mechanisms of social protection rights for the self-employed. We could probably draw analogies between these schemes and the dispute resolution mechanisms envisaged in the EU’s proposed Regulation on promoting fairness and transparency for business users of online platform intermediation services. After all, clubs and leagues are not much more than platforms intermediating between providers of a service (players and coaches) and its users (fans and sponsors) and they too would be wise to “Uber themselves before they get Kodak’ed”, as quite interestingly depicted in the Netflix drama High Flying Bird. The agent certification and supervision regimes of players’ associations could probably also find some analogous application in the “gig economy,” as could the group licensing and corporate partnership schemes established by players’ associations in the US.

Conclusion

The sport sector perfectly represents some of the key challenges posed by the gig economy, in particular the issue of granting social protection rights to self-employed workers.

The Universal Declaration of Player Rights recently published by the World Players’ Association, with its “right to a sporting environment that is well governed, free of corruption, manipulation and cheating and protects, respects and guarantees the fundamental human rights of everyone involved in or affected by the sport” and its articulation of the player’s “right to share fairly in the economic activity and wealth of the sport,” could probably be transformed easily and without much editing into a “Universal Declaration of Freelancer Rights.”

Yet the traditional binary divide between employment and entrepreneurship still lingers in the sports law literature and decisions. The time has come for this to change. The courts should lead the way in recognising that professional athletes do both: they perform business activities in which they enjoy a high degree of independence and responsibility for their economic fate and professional development, and should therefore enjoy the advantages which the law associates with conducting such activity, but at the same time provide work and are economically subordinate to more powerful organisations, in the dialogue with which they should be able to unite and enjoy certain protections similar to those enjoyed by employees. The sport sector can thereby indeed be a hotbed for rules that could accommodate the entire gig economy.

Stanisław Drozd