For professional sportspeople, there are a whole host of legal issues to think about in addition to performing at the peak of their chosen sport. These issues play a pivotal role in shaping the framework within which athletes, teams and sporting organisations operate.
Legal considerations in the sporting world encompass everything from immigration status, to equal pay, to intellectual property, and so on. If any of these facets is not properly managed, certain legal issues can provide a distraction from training and performance and can also lead to reputational issues.
Here, Michelmores’ Robert Forsyth, a Partner at the Firm and heavyweight Employment lawyer of eighteen years, gives consideration to some of the key legal issues that will need to be explored for athletes to remain at the top of their league.
Whether a sportsperson is employed or self-employed will depend on the sport and the individual’s circumstances. For self-employed athletes, consideration should be given to how they structure their affairs (for example as a sole trader, limited company, etc.) and tax consequences will be key here.
For employed athletes, the terms of any employment contract should be carefully considered and negotiated. Pay is an obvious one, but sickness/injury pay and provisions, the employer’s levels of control over activities (both within the sport and outside – e.g. sponsorship, image rights, medical treatment), as well as performance requirements and termination provisions should be documented clearly in the contract.
Particular attention will need to be paid to any restrictive covenants[1] in the contract, as these can limit an athlete’s freedom after their contract has ended. It is also important to remember that employers owe their employees a duty of care with regards to their health and safety (including mental health) at work, and employees are protected from discrimination and harassment.
Athletes who sign contracts to perform abroad need to ensure that they have, or can obtain, a visa to do so, and if they are employed, that their club/team have the correct sponsor licence or equivalent accreditation. Temporary appearances abroad may require a short-term visa – obtaining these can be a time-consuming process but administrative oversights have led to footballers not being able to complete transfers, for example, and players left unable to travel and compete with their national team.
The penalties for both athletes and clubs for breaching immigration laws can be severe. Athletes will also need to be aware of any potential tax consequences of playing/working in some countries.
Closely linked to the ‘image rights’ topic below, professional sportspeople should aim to become their own ‘brand’. As such, a strategy to obtain protection in relation trade marks and related IP should be developed. Equally, swift action should be taken with regards to any unauthorised use of such rights, and as part of a wider “brand protection” piece, action taken (or not) where potentially defamatory information has been published. Brand protection for a professional athlete must be considered in the same way as that of a commercial organisation.
It’s important that professional athletes protect and control the proprietary rights associated with their persona, including images, signature, names, slogans and other identifying features.
Unlike the US and Germany, English law does not recognise ‘image rights’ as a discrete concept and therefore no specific legislation governs this area (although Jersey does have specific laws). Protecting and exploiting image rights therefore falls to a mix of commercial contracts, statutory and common law provisions such as the law of passing off.
In terms of protecting image rights, an athlete will need to decide how to structure the ownership of any rights (whether as an individual or through a company) and tax consequences will need to be considered carefully. To then exploit image rights, athletes should ensure that detailed contracts are in place with relevant brands/organisations to govern the use of those image rights to ensure the athlete is properly protected.
Image rights can be very valuable, and many organisations will want to make use of them for a wide range of marketing and promotional purposes – think ticket sales, merchandise, events, e-sports, etc. The key point is that athletes must be able to demonstrate “goodwill” in their image has been generated through its commercial exploitation as distinct from the fame and notoriety of being a sportsperson.
Many professional athletes will engage third parties to help support them so that they can focus on their sport. Agents are often engaged to identify and exploit commercial opportunities for the athlete and assist with contract negotiations, while managers can be used to organise schedules, liaise with key stakeholders and ensure everything is in place for the athlete to succeed.
Some sports offer more opportunities than others for personal sponsorship. Team sports will often be heavily sponsored, and sometimes these sponsorships may conflict – e.g. an athlete may be obliged to promote the sponsors of their national team, which may be a competitor of their club’s sponsor. If an athlete is employed, the employment contract may contain obligations relating to an employee’s promotional activities for a sponsor.
As well as the inevitable commercial arrangements, it is also sensible for athletes to ensure their personal legal affairs are in order. For example, this could range from pre-nuptial agreements to wills, tax planning and property transactions – frequently athletes will have assets in multiple jurisdictions meaning athletes should ensure their advisers are fully equipped to advise them on the legal aspects of their asset portfolio.
Athletes have several specific tax considerations to manage their unique income streams effectively. Income from image rights can be treated separately from performance earnings, often managed through personal service companies to benefit from lower corporation tax rates.
However, these arrangements can be subject to scrutiny from HMRC so need to be considered carefully. Athletes can claim relief through the UK’s numerous tax treaties to avoid double taxation on income earned abroad.
Prize money and sponsorship earnings are often taxable in the country where they are earned, requiring careful reporting and compliance with both local and UK tax laws. Some countries require tax to be withheld on payments to non-resident athletes, which can often be claimed as a credit in the UK.
The Statutory Residence Test (SRT) determines if an athlete is a UK tax resident, impacting whether they are taxed on worldwide or only UK-source income, making proper management of days spent in the UK crucial. Engaging with tax professionals is highly advisable to navigate these complex tax rules and ensure compliance with both UK and foreign tax obligations.
The above list is not exhaustive, and there are of course a host of other issues to think about depending on an athlete’s specific circumstances. For example, the interaction between club and country commitments (the arrangements for which can differ hugely depending on the sport and its governing body), selection/eligibility disputes and regulatory matters, are all matters which can crop up from time to time. Indeed, for sportswomen, the issue of equal pay is particularly topical at the moment and may well be something which arises.
Michelmores has experienced lawyers specialising in each of the areas touched on above. If you’d like to know more, please get in touch with Robert Forsyth.
[1]Restrictive covenants in an employment context involves an employer placing restrictions on an athlete’s activities after the employment relationship has ended.
