Employee, worker or self-employed? The Question is back in the courts

With the growth in the “gig economy”, more and more businesses are utilising innovative contractual arrangements to maintain their workforce. Big names like Uber and Deliveroo have been at the forefront of this development. In recent months though, persons working within the gig economy have been taking legal action with a view to enforcing employment rights for themselves and for their co-workers. Pimlico Plumbers v Smith represents the latest skirmish in this battle.

Pimlico Plumbers v Smith: A Background

The case of Pimlico Plumbers v Smith was brought by Gary Smith, a plumber in a contractual relationship with Pimlico Plumbers, who was dismissed in May 2011. Mr Smith sought to argue at the Employment Tribunal that he was an employee of Pimlico Plumbers. When the Tribunal rejected this argument, he sought to argue before the Employment Appeal Tribunal, and before the Court of Appeal, that rather than being self-employed, he was a worker. Pimlico Plumbers disagreed.

The determination of whether an individual is an “employee”, a “worker”, or is “self-employed” depends on the specific facts and the particular contractual arrangements of each case. That said, the courts have determined that certain factors point towards someone being a worker, whilst others point towards self-employment.

In Pimlico Plumbers v Smith, many aspects of Mr Smith’s working relationship with Pimlico Plumbers would tend to be associated with someone who had the status of a worker:

• Mr Smith was required by his contract to wear a uniform bearing the Pimlico Plumbers logo.
• He was required to lease a van from Pimlico Plumbers. The van bore Pimlico branding.
• Mr Smith was normally expected to work a minimum number of hours every week.
• He was restricted in the work he could carry out directly for clients himself rather than on behalf of Pimlico Plumbers.

On the other hand, certain aspects of Mr Smith’s working would tend to be associated with someone in self-employment.

• Mr Smith was responsible for his own tax and was VAT registered.
• He was responsible for arranging insurance cover for himself.
• Mr Smith was required to repair errors in his plumbing without charge.
• He invoiced Pimlico Plumbers for work done.

The Court of Appeal noted that, on one hand, the business model was intended to suggest to clients of Pimlico Plumbers that its operatives were employees. On the other hand though, the model sought to maintain a relationship between the business and the operative of client and independent contractor.

The Employment Tribunal, Employment Appeal Tribunal, and Court of Appeal all decided that, contrary to Pimlico Plumber’s assertions, Mr Smith was in fact a worker.

Why?

The Court of Appeal had regard to the fact that, although Mr Smith could turn down specific jobs, he was still expected to undertake a certain number of hours work every week.

The Court also placed weight on the fact that, although Mr Smith could swap jobs with other Pimlico operatives, he did not have an unrestricted ability to have someone carry out work on his behalf.

Also relevant for the Court was the fact that Mr Smith’s contract included a clause that prevented him from undertaking work as a plumber in Greater London for a period of three months after the end of his relationship with Pimlico Plumbers. This clause is of a type often found in contracts of employment.

Pimlico has indicated that it is considering its position, and may pursue a further appeal to the UK Supreme Court. There may yet be a final chapter to come in the story of Mr Smith and Pimlico Plumbers.

Why does the categorisation matter?

One may wonder why the distinctions between the categories of “self-employed”, “worker” and “employee” matter.

For the individuals belonging to any of these categories, and those persons contracting with them, the categorisation can make a very significant difference indeed.

Those who have the status of “employee” benefit from considerable employment protection in terms of unfair dismissal. It is likely for this reason that, after having been dismissed, Mr Smith first sought to argue that he was an employee. Employees are also subject to the PAYE system and are entitled to parental leave. As well as these rights, employees benefit from all the rights afforded to workers.

Individuals who have the status of “worker” benefit from a lesser package of rights than employees. Nonetheless, they are entitled to the National Living Wage or the National Minimum Wage (depending on their age). They also benefit from holiday entitlement, and rights in relation to discrimination.

By contrast, a “self-employed” person benefits from none of the above rights.

Lessons to be learnt

For both businesses and operatives in the gig economy, there are lessons to be learnt from Pimlico Plumbers v Smith and other recent case law.

For businesses, the key lesson is that they should ensure the contracts they have with their operatives make employment status clear. Indeed, Pimlico Plumbers themselves have learnt this lesson. Its founder, Charlie Mullins, commented after the ruling that, “like our plumbing, now our contracts are watertight.”

It is clear though, from recent case law that, where the contractual position does not reflect the on-the-ground-reality, courts will not restrict themselves to examination of the contract. Businesses should therefore seek to ensure their contracts reflect practical reality.

For operatives, the key lesson is that they should take steps to make themselves aware from the outset of their relationship with a business exactly what their employment status is, and what rights they benefit from as a result.

Contact Dallas McMillan

Our Glasgow-based employment law solicitors have considerable expertise and experience in the field of employment law, both contentious and non-contentious.

For further information on how our Employment Solicitors can help you, please contact Gordon Bell or David Hutchison on 0141 413 4292.