In the latest in a growing line of cases, the UK's highest court has ruled that despite being VAT-registered and paying self-employed tax, a plumber working for Pimlico Plumbers was entitled to basic workers' rights. This means that he can continue with his claims against Pimlico Plumbers for holiday pay, unlawful deductions from wages and discrimination. If the court had ruled that he was self-employed, as his contract said he was, he would not have been entitled to bring these claims.
This case, and those that have gone before it, including cases involving Uber, CitySprint and Deliveroo, has been widely reported in the press and together they have had a substantial impact on businesses and their workforces in the gig economy, where a lack of clarity in the law has led to confusion and uncertainty.
What happened in this case?
Gary Smith had worked solely for Pimlico Plumbers for six years under a contract which described him as an 'independent contractor' in business on his own account. His contract was ended after he suffered a heart attack. He brought a number of claims against Pimlico Plumbers in the Employment Tribunal, including unfair dismissal, unlawful deductions from wages, holiday pay and disability discrimination. Before his claims could be heard, the court had to decide what claims he was allowed to bring, which depended on whether he was an employee, a worker or self-employed.
The Employment Tribunal decided that Mr Smith was not an employee of Pimlico Plumbers. This meant he could not carry on with his claim for unfair dismissal - as only employees can claim unfair dismissal. Mr Smith did not appeal against this decision. Whether Mr Smith could bring his other claims depended on whether he was a 'worker', rather than truly self-employed as his contract said he was. As we have seen before, the courts look beyond the label that the written contract puts on their status, and consider the reality of how their relationship works in practice. So even if the contract states that someone is self-employed, a court may decide that they are in fact a worker or employee, with the greater employment protections that follow.
In Mr Smith's case, the Employment Tribunal decided that he was a worker. This finding was appealed all the way to the Supreme Court by Pimlico Plumbers, after the Employment Appeal Tribunal and Court of Appeal agreed with this conclusion.
The Supreme Court decided that the Employment Tribunal had been entitled to reach the decision it did. As a worker, Mr Smith was entitled to certain employment rights, such as holiday pay, and his other claims will now be heard on that basis.
Key factors in the court's decision that Mr Smith was a worker were their conclusions that:
- The dominant feature of Mr Smith's contract was that he was required to perform the work himself. Although he could provide a substitute to do the work for him – the substitute had to be another Pimlico Plumber on similar terms.
- Whilst Mr Smith was able to reject work and took on some financial risk, this did not outweigh the factors pointing against Pimlico Plumbers being a client of a business run by Mr Smith. The company determined the minimum number of hours to be worked and placed numerous restrictions and controls on how Mr Smith carried out his work, for example requiring him to wear a uniform and be clean and smart at all times. The company also dictated when and how much (if any) pay he received for his work. The subordinate position of Mr Smith in the relationship between himself and Pimlico Plumbers was a key indicator that Pimlico Plumbers was not a client of a business run by Mr Smith, but that he was really their worker.
What this case means for businesses
The ruling is in line with what was expected and with other recent high-profile employment tribunal gig economy cases, such as the Uber decision.
It is a reminder that in every case like this, courts will have to grapple with the facts of the particular case; considering whether personal service is required and if there is a genuine right to provide a substitute and looking at questions of control, risk and subordination. This analysis will go beyond the terms of the written documentation.
What has emerged from the recent line of cases is that where a business seeks to exercise a significant amount of control over how and by whom the work is done, integrates the individual into its own business and dictates terms which put them in a subordinate position, they are likely to be found to be a worker (if not an employee).
Whilst a ruling from the UK's highest court will help to provide some much needed clarity in this area, a cloud of uncertainty remains over the rights of people working in the gig-economy. A government consultation seeking views on ways to make it clearer what workplace rights people have closed at the start of June. It remains to be seen whether the government will take action to help provide more clarity to businesses and their workforces.
Whilst the government may try to legislate in this area in an attempt to make it clearer how to decide whether an individual is an employee, worker or self-employed, it seems likely that there will always be an element of interpretation and the outcome will turn on the specific facts of the working relationship. This means that this area is likely to continue to cause confusion and uncertainty for some time to come.