The Supreme Court’s decision this week in Pimlico Plumbers v Smith is the latest in a line of cases on the so-called ‘gig economy’.
Mr Smith was engaged by Pimlico Plumbers for six years, as a heating engineer.
The contract he signed with Pimlico stated, amongst other things, that he was an ‘independent contractor’ and that Pimlico were under no obligation to offer him work and he was under no obligation to accept any offer of work.
Mr Smith was registered as self-employed with HMRC.
When Mr Smith’s engagement was terminated, he brought claims in the Employment Tribunal, arguing that he was an employee and / or a worker of Pimlico.
What was decided?
The Employment Tribunal (ET) decided that Mr Smith was not an employee but did qualify as a worker.
Pimlico’s appeals to the Employment Appeal Tribunal and the Court of Appeal were unsuccessful. Pimlico appealed, for the final time, to the Supreme Court.
The Supreme Court has now rejected Pimlico’s appeal, agreeing with the earlier courts that Mr Smith was really a worker, and not truly self-employed.
Although there were certain factors in the relationship between Mr Smith and Pimlico which pointed towards self-employment, such as the fact that Mr Smith was not obliged to accept work if it was offered to him, and the fact that he bore some financial risk in relation to the services he carried out, these did not outweigh the factors that pointed towards him being a worker.
One of the key factors for the Court was the element of ‘personal service’, which is a key factor in a worker relationship. The contract Mr Smith signed with Pimlico gave him no express right to send a substitute to do the work for him. Whilst in practice Mr Smith could swap his ‘shift’ with another Pimlico operative, that was not enough to mean he was not obliged to carry out the work personally.
The Court found that Mr Smith was not a client or customer of Pimlico. The Court referred to Pimlico’s ‘tight control’ over Mr Smith in terms of administrative instructions, and regarding when and how much it was obliged to pay him. Taking everything into account, the Court decided the ET had been entitled to find that Mr Smith was really a worker.
What does this mean for businesses?
A worker, whilst not entitled to the full range of employment rights, such as the right not to be unfairly dismissed, does have some of the rights afforded to employees, such as the right to be paid the National Minimum Wage, and the right to holiday pay.
The question of employment status and the ‘gig economy’ is very much in the spotlight. These types of cases are not going to go away any time soon. The decision in Pimlico may well open the floodgates to more claims. However, following the Taylor Review, the Government is now consulting on the issue of employment status, which may have an impact on what happens in this area moving forward.
Whilst this case may be seen as a blow to those who engage individuals on a ‘self-employed’ basis, it is important to remember that each case is going to depend on its own facts.
However, the case does remind us of the simple, but important, point that, just labelling someone as ‘self-employed’, does not mean that is their true, legal status, if the way the relationship works in practice is not actually consistent with self-employment.
The case also reminds us that an individual may be entitled to workers’ rights even though they have paid their own tax as a self-employed person.
Please get in touch with our Employment team if you have any questions about how this might impact your business.