Legal Update: Pimlico Plumbers & Anor v Smith [2017]

Circular No: NP/031/17

Our Ref: LA/02/17

22nd February 2017

To: Branches, Regional Councils & Regional Offices

Dear Colleague,

Legal Update: Pimlico Plumbers & Anor v Smith [2017] 

The Court of Appeal recently rejected an appeal by Pimlico Plumbers Ltd against a ruling that Mr Smith was a worker within the meaning of section 230(3)(b) of the Employment Rights Act 1996.

It is important to determine whether someone is self-employed, an employee or a worker, as this determines the level of employment rights they are entitled to. There are a number of factors that are used to determine an individual’s employment status. For example, a self-employed contractor will provide his or her own services, but may also sub-contract work to others, and are free to turn down work, whereas a worker generally only has a limited right to send someone else to do work and is obliged to do as the employer requests.

Mr Smith worked for Pimlico Plumbers until 2011 when he claimed he was unfairly or wrongfully dismissed. In order to proceed with these claims, he was required to show he was an employee. He also made claims for disability discrimination as well as for holiday pay and unauthorised deductions of wages for which he had to show he was a worker.

Mr Smith was described as an independent contractor of the company; he had to pay his own income tax and was registered for VAT. He provided his own tools and indemnity insurance. However, Mr Smith wore the company uniform and drove a van with its logo and contracts and estimates were issued in the company’s name. He was not permitted to provide a substitute for the services he had agreed to provide, although in practice operatives would sometimes swap jobs and shifts.

The Employment Tribunal Judge held that Mr Smith was a “worker” but not an “employee”. She held that Mr Smith was not an employee as the company did not have an obligation to provide him with work. In addition, he made use of the tax advantages of being self-employed. However, he was a worker as he did not work for anyone else and there was no evidence he sought to do so, and as such he was entitled to proceed with his discrimination, holiday pay and wages claims. Pimlico Plumbers appealed.

The Employment Appeal Tribunal upheld the tribunal’s decision. It found that the Tribunal had been entitled to find that a self-employed contractor who was subject to a high level of control by his employer was a worker and not an employee. Although operatives swapped jobs and shifts around as a means of distributing work among the operatives, this was an informal practice that Pimlico Plumbers tolerated, but without any legal obligation to do so. As this did not amount to an unfettered right to substitute himself with someone else, Mr Smith could qualify as a worker.

Pimlico subsequently appealed to the Court of Appeal.

The Court of Appeal dismissed the appeal.  It was recognised that Mr Smith undertook to personally provide his services and that there was no express right for him to send someone else in his place.  The Court noted that Mr Smith was obliged to work a certain number of hours per week and certain aspects of his contract were inconsistent with genuine self-employment.

The Court of Appeal recognised a business model under which operatives are intended to appear to clients of a business as working for the business, whilst the business seeks as the same time to maintain that the relationship between itself and its operatives is that of client and independent contractor, rather than that of employer and employee or worker.

This case is the latest in a series to place the spotlight on employment status and is important for members working in the “gig economy”. It follows the Tribunal decisions in the City Sprint and Uber cases that couriers and drivers respectively were “workers”, despite contracts labelling them as self-employed contractors. There is a growing body of case law suggesting a willingness of the Courts to look beyond the label placed on a working relationship, and focus on the reality of the situation.

Yours sincerely

 

Mick Cash

General Secretary