Employment status is shaping up to be one of the hot employment law topics for 2017. Early February and we already have a Court of Appeal judgment on the subject. Today, the Court of Appeal decided, in the case of Pimlico Plumbers Ltd v Smith, that a plumber, who was engaged as a “self-employed operative”, should in fact have been treated as a “worker” for employment rights purposes. Workers have rights to, for example, paid annual leave and the national minimum wage.
Smith worked as a plumber for Pimlico Plumbers Limited for around 6 years. He was labelled as a “self-employed operative” and described in documentation as an independent contractor, in business on his own account. Under the arrangements between the company and the claimant –
- He was required to wear a Pimlico Plumbers uniform;
- He was required to drive a van with the Pimlico logo;
- He had his movements monitored by Pimlico via GPS installed in the van;
- He could only be contacted by customers through Pimlico;
- Customer contracts and estimates were issued in the name of Pimlico;
- His contract did not permit him to provide a substitute to do his work and largely pointed to personal performance. Pimlico did permit work to be transferred between operatives and where necessary allowed external specialists to be used;
- His contract contained post-termination restrictive covenants;
- He was paid by Pimlico against receipt of an invoice;
- He was required to provide his own tools, equipment and materials;
- He took personal liability for work performed by him and provided his own professional indemnity insurance;
- He was taxed as self-employed and was VAT registered;
- According to the contract, there was no obligation on the company to offer and no obligation on Smith to accept work, but he was required to notify the days on which he was unavailable;
- He could ostensibly reject particular jobs and could decide his own working hours, but the tribunal accepted that he was required to do a minimum number of hours work each week.
Employment Tribunal, Appeal Tribunal and Court of Appeal agree “worker” status
Smith brought a claim to the employment tribunal alleging that, following a heart attack, he was unfairly or wrongfully dismissed by Pimlico. His claim also alleged direct disability discrimination, discrimination by reason of failure to make reasonable adjustments, and contained allegations in respect of holiday pay and unauthorised deductions from wages.
The Employment Tribunal considered, as a preliminary issue, the question of Smith’s employment status and concluded that he was a “worker” rather than genuinely self-employed or an employee. This decision was upheld by the Employment Appeal Tribunal and has now also been approved by the Court of Appeal.
Key factors in the arrangements between Smith and Pimlico which led to the worker status finding were
- The obligation on Smith to perform work personally and the absence of a contractual right of substitution;
- That Smith was required to work a minimum number of hours per week, despite the documentation purporting to allow him to reject work and decide his own working hours; and
- The degree of control exercised over Smith by Pimlico which showed that they were not a customer of a business run by him. Rather, Smith was an integral part of Pimlico’s business and was subordinate to it. The contractual restrictive covenants were important to this finding.
Key factors in the arrangements which led to Smith being held not to be an employee were –
- The fact that there was no obligation on Pimlico to provide Smith with work;
- The intentions and actions of the parties demonstrated they considered him to be self-employed; and
- The financial risk which Smith bore.
The finding of worker status means that Smith will be able to pursue his disability discrimination claims and those for unlawful deductions and holiday pay. He will be unable to continue with his unfair dismissal claim.
Whether an individual is classified as self-employed, a worker or an employee will depend on the facts of each particular workplace arrangement. However, there are some useful pointers to be taken from the outcome of this case. First, it is crucial for businesses to be aware that a classification of self-employed for tax purposes does not automatically mean that the same classification will apply for employment rights purposes. Further, for self-employed status to hold true, removing a requirement for personal service and allowing a right of substitution is important. In addition, the use of standard contractual documentation should be approached with caution as there is a risk that it will not reflect the reality of the arrangements between the parties and suggest a different type of “employment” arrangement to what is intended.