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Vincent Galea

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Supreme Court decides “landmark” case on employment status

employmentlaw@work / 13 June 2018

The Supreme Court has today dismissed an appeal by Pimlico Plumbers holding that a plumber, described as an “independent contractor” in his contract, was, in reality, a “worker” under employment legislation.

ISSUE

Mr Smith worked for Pimlico Plumbers (“PP”) for over five years.  His contract stated (amongst other things) that he was an independent contractor, that he was in business on his own account, that he was not obliged to accept work from PP and that PP was not obliged to offer it to him.  However, it also stated that he had to work for a minimum of 40 hours per week, he had to hire and drive a PP branded van, he had to wear a PP branded uniform and he was subject to restrictive covenants.  There was no express right to substitute his services for those of another plumber, but in practice plumbers could swap assignments between themselves.

When his working arrangement ended, Mr Smith brought claims in the Employment Tribunal (“ET”) for failure to pay holiday pay, unlawful deductions from wages and disability discrimination.

The ET looked at Mr Smith’s status and decided that he was not an employee but that he was a “worker” relying on the requirement for him to provide personal services to PP and the fact that he did not have an “unfettered right to substitute” his services.

PP appealed all the way to the Supreme Court.

KEY DATES

The Supreme Court’s decision was handed down on 13 June 2018.

IMPACT

The Supreme Court dismissed PP’s appeal finding that:

  • The ET was entitled to find that Mr Smith’s only right of substitution was to substitute himself for another PP plumber who was subject to the same contractual obligations as Mr Smith.  This meant that the identity of the substitute – and not just the fact that the work in question was performed – was an important factor;
  • The ET was entitled to conclude that this limited right of substitution was not inconsistent with an obligation to perform services personally;
  • Mr Smith was therefore a “worker” unless it could be said that PP was a “client” or a “customer” of his; and
  • PP was not a “client” or “customer”, particularly because:
    • Mr Smith wore a branded uniform, drove a branded van, carried an ID card and had to follow instructions from the PP control room;
    • There were “severe” terms as to when and how Mr Smith was paid;
    • The contract referred to “wages”, “gross misconduct” and “dismissal”; and
    • Mr Smith was subject to restrictive covenants.

Mr Smith’s claims will now return to be heard at the ET.

ACTION

This decision will be of significant interest to businesses that engage staff as “independent contractors”.  There is a risk that, where similar factors as in this case apply, those contractors may be deemed “workers” and may therefore be entitled to receive holiday pay and to be protected by other employment legislation (including the discrimination provisions of the Equality Act 2010).

Whilst cases like this one are always somewhat limited in their impact (because of the amount of fact sensitive material involved), this decision does highlight the importance of analysing the realities of a working arrangement, rather than relying on the contractual labels used.

This is not strictly a “gig economy” case and so the implications for organisations operating in that sphere may be limited.  Nevertheless, we await with interest decisions in the Uber and Deliveroo cases which are due to be heard later this year.

In the meantime, the decision may, of course, have the unwelcome impact for employers of encouraging other “independent contractors” to challenge their legal status.

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