Total and Partial Unemployment TPU 415.4
An athlete is an employee or an independent contractor depending upon the sport involved and the terms of the contract under which he/she performs.
In team sports, such as football and baseball, where the player competes under the direction and control of a coach or manager, he/she is an employee. On the other hand, in individual sports competition, such as golf or tennis, where the athlete is normally free to determine his/her own style and manner of performing, he/she is an independent contractor.
To differentiate between athletes who are employees and those considered to be independent contractors, the Board, in Tax Decision 2363, said:
"Among the sports in which the participating athletes have been considered to be employees are football, baseball, basketball, and hockey. Among those in which they have been considered not to be employees are golf, boxing, wrestling, skating, and midget auto racing.
In the first group of cases above, there was generally an owner, manager, trainer, coach, or captain who had the right to direct and control the details of the player's activity. In contrast, in the second group of cases, the sport was generally one that involved athletic competition between individuals rather than teams."
(For a further discussion of whether an athlete under contract is employed during the life of the contract or only during the playing season, see TPU 105, Contract Obligation.)
In determining whether an athlete who performs services is an employee or an independent contractor, it can be seen from the above decision that the important factor is whether the athlete is responsible to the principal only for the result and not for the manner and means of accomplishing it.
In the case of individual type sports such as boxing, wrestling, golfing, skating, skiing, tennis, midget auto racing, or track and field, the promoting organization normally provides no training or coaching, and has no right to influence the outcome of any competition. As these athletes under contract have developed a style and reputation which makes them a drawing card, no right to control their style or manner of competing is contained in their contracts. On the contrary, the promoter merely selects the type of event in which the athlete will participate and schedules appearances.
Compensation for participation as an independent contractor in individual type sports events may be for a fixed price, or may involve only travel expenses and per diem and/or prize money if the athlete is successful in competition. As an independent contractor the athlete is unemployed and may be entitled to reduced benefits under Section 1279 if his/her net earnings (compensation plus prize money, less expenses) are not XE.