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Flushing out employment status issues
Pure Employment Law > News > Flushing out employment status issues

Flushing out employment status issues

28 February 2017 by Marianne Wright
Flushing out employment status issues

Hot on the wheels of the recent Employment Tribunal decisions that Uber drivers and a CitySprint courier were workers (rather than self-employed), the Court of Appeal has recently considered another case of employment status, this time in relation to a plumber working for Pimlico Plumbers.

The case, Pimlico Plumbers Ltd & Anor v Smith, concerned Mr Smith who had worked for Pimlico Plumbers for over 5 years. Following the termination of their working arrangement, Mr Smith sought to bring claims in the Employment Tribunal, including claims for unfair dismissal, wrongful dismissal, holiday pay, unlawful deductions from wages and disability discrimination.

The Employment Tribunal (ET) had to determine, as a preliminary issue, whether Mr Smith was an employee, a worker, or self-employed, as this would determine which, if any, of the claims he was eligible to bring. Workers are not entitled to as many employment rights as employees, but they have more employment rights than those who are self-employed. See our previous articles - here for a quick reminder of the definitions of these different types of employment status and here for a list of some of the factors that ETs will take into account when determining employment status.

The ET concluded that Mr Smith was a worker and this was upheld by the Employment Appeal Tribunal (EAT). Pimlico Plumbers appealed to the Court of Appeal. Mr Smith had by this stage dropped his argument that he was an employee, and so the Court of Appeal had to decide whether to uphold the decision that Mr Smith was a worker (and therefore eligible to pursue claims for disability discrimination, failure to pay holiday pay and unauthorised deductions from wages), or to allow Pimlico Plumbers’ appeal on the grounds that Mr Smith was self-employed.

As we have discussed in our previous article, many factors will be taken into account when the Courts and Tribunals look at employment status issues, including the actual reality of the relationship between the parties as well as the contractual documentation.

The contractual documentation under which Mr Smith was engaged by Pimlico Plumbers included that he:

  • was an independent contractor and in business on his own account;
  • was not obliged to accept work from Pimlico Plumbers, and they were not obliged to offer him any work;
  • had to provide his own tools and materials;
  • was responsible for dealing with his own tax, and procuring his own liability insurance; and
  • wouldn’t receive payment in certain circumstances where a customer failed to pay Pimlico Plumbers.

However, the contractual documentation also stated that Mr Smith’s normal working hours would be a minimum of 40 hours per week over 5 days, that he was subject to restrictive covenants, and that he had to drive a branded van and wear a uniform.

Although it appears that there were several factors which could indicate a relationship of self-employment, Mr Smith was held to be a worker on the basis that:

  • there was sufficient obligation to provide his work personally;
  • he did not have an absolute right to substitute, at will, someone else to do the work;
  • even though in practice Pimlico Plumbers engineers swapped jobs between each other, and used external contractors in certain circumstances, Mr Smith was under an obligation to provide work personally for a minimum number of hours per week or on the days agreed with the company;
  • there were restrictions on his ability to work in a competitive situation; and
  • he was subordinate to Pimlico Plumbers – as opposed to them being a customer or a client of his business.

One of the main issues that this case considered was the extent to which having a right to substitute someone else to do the work was inconsistent with personal performance (i.e. inconsistent with being a worker). Although there was no specific clause in the contractual documentation allowing Mr Smith to send a substitute to do the work, in practice the operatives swapped jobs between themselves.

The Court of Appeal outlined the main principles regarding personal service. In summary, an absolute right to substitute another person will be inconsistent with worker status, as will a right to substitute which is limited only by having to show that the substitute is as qualified as the contractor (even if this involves following a particular procedure).

On the other hand, a right to substitute only when the contractor is unable to do the work will be consistent with personal service, as will a right to substitute only with the consent of another person who has absolute and unqualified discretion.

The Court of Appeal held that the lack of obligation on Pimlico Plumbers to offer work to Mr Smith or the lack of obligation on Mr Smith to accept work was not inconsistent with his obligation to work a minimum 40 hour week. It meant that he could refuse any particular assignment or a particular date, but it did not mean that he could refuse all assignments. Therefore this didn't prevent him from being a worker.

As the Court of Appeal noted, this case puts Pimlico Plumbers’ business model under the spotlight. The spotlight will continue to be shone on the area of employment status this year, with the results of the Taylor review of modern employment practices, and the Work and Pensions Committee inquiry on self-employment and the gig economy eagerly awaited.

We reported in our ebulletin last August that Deliveroo had introduced contractual terms saying that its contractors (who collect and deliver takeaway orders by bike) agreed that they cannot go to an Employment Tribunal to challenge their employment status. Our view was that such a clause would not be enforceable, although it may act as a deterrent. The Managing Director of Deliveroo has recently confirmed to the Work and Pensions Committee inquiry that they are dropping the clause in question.

Although the ‘gig economy’ and related employment status issues are hitting the headlines at the moment, the ET decision in Mr Smith’s case dates back to 2012. The subsequent litigation in his case only relates to the issue of employment status, and Pimlico Plumbers could appeal the Court of Appeal’s decision on this to the Supreme Court (if they are granted permission to do so). Unless there is a further successful appeal by Pimlico Plumbers, the case will go back to the Employment Tribunal to decide the claims raised by Mr Smith which he is eligible to bring as a worker (he would not be able to pursue his claims for unfair dismissal and wrongful dismissal, as he failed to establish that he is an employee). Further clarity on employment status would be helpful for both employers and employees, however it is not yet clear whether there will be any changes in this area following the current reviews and inquiries into employment status and the 'gig economy'.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or enquiries@pureemploymentlaw.co.uk).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.