February 13, 2017

UK Self-employed status? Not so water-tight

In yet another decision concerning the status of individuals working in the "gig economy" the Court of Appeal has confirmed that a plumber, Gary Smith of Pimlico Plumbers, was a 'worker' for employment protection purposes and therefore, entitled to basic workers' rights such as the right to paid annual leave, right to national minimum wage, whistleblowing protections and protection from discrimination.

Despite the terms of Mr Smith's agreement with Pimlico Plumbers as a self-employed operative, and having accepted that he considered himself to be self-employed for income tax purposes (and was VAT registered), Mr Smith was found to be a worker for employment law purposes.

Mr Smith worked as a plumber exclusively for Pimlico Plumbers from August 2005 to May 2011, when the arrangement was terminated after he suffered a heart attack.  Mr Smith subsequently brought a number of claims in the employment tribunal, including unfair dismissal, wrongful dismissal and entitlement to pay during the period of a medical suspension, along with claims for unpaid holiday pay, unlawful deductions from wages and disability discrimination claims.  In determining the status of Mr Smith and in turn which of the claims, if any, he was entitled to bring, the employment judge considered the following:

  • the main purpose of the arrangement Mr Smith had with Pimlico Plumbers – this was for Mr Smith to personally provide work for them, with no unfettered right to substitute or delegate the work to another contractor; and
  • hours of work - Mr Smith was required to agree the hours he would work with Pimlico Plumbers, with a minimum number of hours required per week.

As we have seen in the recent CitySprint case, the employment tribunal did not simply rely on the terms of the agreement between Pimlico Plumbers and Mr Smith, but looked at the reality of the situation and considered what in fact went on in practice.  Although many of the plumbers swapped jobs around, used each other to help on various jobs and did, where necessary, bring in external contractors to assist, the employment tribunal found that Mr Smith was obliged to provide work personally for Pimlico Plumbers and, accordingly, Pimlico Plumbers could not be considered to be a "client" of Mr Smith's own business (which would have meant Mr Smith was neither a worker nor an employee). Instead, the tribunal found that whilst he was not employee, he was a worker.

After the Employment Appeal Tribunal (EAT) upheld the employment judge’s decision, a further appeal was made by Pimlico Plumbers to the Court of Appeal, where the decision of the Mr Smith's worker status was once again considered.  It was decided that the employment judge had correctly identified the key factors for determining Mr Smith's status, namely:

  • as there was no express right of substitution or any scope to imply a right of delegation, there was an obligation for Mr Smith to personally perform the services under the agreement; and
  • the agreement determined the minimum number of hours to be worked and placed considerable restrictions on Mr Smith.  This degree of control was not consistent with Mr Smith being a self-employed contractor, as Pimlico Plumbers were claiming.

What this case means for businesses

Although Pimlico Plumbers have already indicated that a further appeal to the Supreme Court is very likely, this decision has further highlighted the need for clarity around the status of those people working within what has become known as the "gig economy".  It emphasises the willingness of the courts to look behind the agreement or contract and to observe the reality of those working relationships.   

For all employers, the case serves as a reminder that there are a number of criteria which have been developed by the courts to determine employment status and although this case emphasises the importance of looking at the reality of the relationship, it still remains of the utmost importance that the relationship is properly documented.  Previous cases have shown that this will not be decisive in determining status, but it can tip the balance if the situation is marginal.

Looking ahead

The Pimlico Plumbers decision is in line with recent high profile employment tribunal "gig economy" cases such as the claims by drivers working for Uber, and couriers working for Citysprint. These also found that drivers/couriers had worker status. 

The topic of worker status is likely to dominate the headlines in the year ahead, not just in the courts but also as a result of a number of inquiries now taking place. Probably the most significant of these is the Independent  Review  of Employment Practices in the Modern Economy led by Matthew Taylor which will consider the implications of new models of working on the rights and responsibilities of workers, as well as on employer freedoms and obligations. The Taylor report is expected to be published in summer 2017 and the outcome will inform the government's industrial strategy. Further inquiries, both launched in December 2016, include the inquiry by the Work and Pensions Committee into the implications of the gig economy on the welfare system including state pensions, and the inquiry into the tax issues of the gig economy by the Office of Tax Simplification.

Acas will also be looking at "gig" work in more depth in 2017 and is expected to issue further guidance around the many different types of employment status and accompanying workplace rights later in 2017.

Please click here read the full Court of Appeal decision.