Employment status remains one of the hottest topics in employment law this year. The Supreme Court has added to the debate today, handing down judgment in Pimlico Plumbers Ltd v Smith. The Supreme Court unanimously held that a plumber who was engaged as a “self-employed operative”  should in fact have been treated as a “worker” for employment rights purposes.

Facts

Smith worked as a plumber for Pimlico Plumbers Limited (Pimlico) for around 6 years. He was labelled as a “self-employed operative” and described in documentation as an independent contractor, in business on his own account.    Under the arrangements between the Pimlico and Smith:

• He was required to wear a Pimlico uniform;
• He was required to drive a van with the Pimlico logo;
• He had his movements monitored by Pimlico via GPS installed in the van;
• He could only be contacted by customers through Pimlico;
• Customer contracts and estimates were issued in the name of Pimlico;
• His contract did not expressly permit him to provide a substitute to do his work and largely pointed to personal performance. Pimlico did permit work to be transferred between operatives and where necessary allowed external specialists to be used;
• His contract contained post-termination restrictive covenants;
• He was paid by Pimlico against receipt of an invoice;
• He was required to provide his own tools, equipment and materials;
• He took personal liability for work performed by him and provided his own professional indemnity insurance;
• He was taxed as self-employed and was VAT registered;
• According to the contract, there was no obligation on the company to offer and no obligation on Smith to accept work, but he was required to notify the days on which he was unavailable;
• He could ostensibly reject particular jobs and could decide his own working hours, but the tribunal accepted that he was required to do a minimum number of hours work each week.

Employment Tribunal, EAT and Court of Appeal agree “worker” status

Smith brought a claims in the employment tribunal alleging that he was unfairly or wrongfully dismissed by Pimlico, also alleging direct disability discrimination, discrimination by reason of failure to make reasonable adjustments, and claims in respect of holiday pay and unauthorised deductions from wages.The Employment Tribunal considered, as a preliminary issue, the question of Smith’s employment status and concluded that he was a “worker” rather than genuinely self-employed or an employee. This decision was upheld by the EAT and the Court of Appeal.

Supreme Court dismisses appeal

The Supreme Court unanimously dismissed Pimlico’s appeal. The key factors which led to the worker status finding were that:

• There was an obligation on Smith to perform work personally; and
• The status of Pimlico was not that of a client or customer of Smith.

In respect of personal service, the court found that there was no express contractual right of substitution. Smith was permitted to use an assistant or to bring in an external specialist contractor, but that did not amount to substitution. Smith did have a limited facility to substitute another Pimlico operative but the tribunal was entitled to hold that the dominant feature of Smith’s contracts with Pimlico was an obligation of personal performance.The tribunal was therefore entitled to conclude that Smith was a limb b worker, unless the status of Pimlico was that of a client or customer of Smith. In determining this, the court considered how relevant it was to discern the extent of Pimlico’s contractual obligation to offer him work and the extent of his obligation to accept such work as it offered to him (often referred to as mutuality of obligation). The courts below found that Pimlico’s contractual obligation was to offer work to Smith but only if it was available, and Smith’s contractual obligation was to keep himself available to work for up to 40 hours on 5 days a week ; there was an umbrella contract which made it unnecessary to consider the relevance to worker status of a finding that contractual obligations only existed during assignments.The court went on to consider whether Smith independently marketed his services to the world in general, or whether he was an integral part of Pimlico’s business. The court found that although Smith took some financial risks and had control over the manner in which he did his work, there were features of the contract which strongly militated against recognition of Pimlico as a client or customer. Pimlico’s tight control was reflected in the requirement to wear uniform, drive a branded van, carry Pimlico ID and closely follow administrative instructions. The severe terms as to when and how much he was paid were also inconsistent with him being an independent contractor. The contract also made reference to ‘wages’ ‘gross misconduct’ and ‘dismissal’ and there were covenants restricting Smith’s working activities following termination. The tribunal was entitled, by a reasonable margin, to conclude that Pimlico could not be regarded as a client or customer of Smith.

The finding of worker status means that Smith will be able to pursue his disability discrimination claims and those for unlawful deductions and holiday pay.

Comment

Whether an individual is classified as self-employed, a worker or an employee will still depend on the facts of each particular workplace arrangement.   However, there are some useful pointers to be taken from the outcome of this case.   First, it is crucial for businesses to be aware that a classification of self-employed for tax purposes does not automatically mean that the same classification will apply for employment rights purposes.   Further, for self-employed status to hold true, removing a requirement for personal service and allowing an unqualified right of substitution will be helpful. The greater the degree of control which the company exerts over the individuals, the more likely it is that they will be regarded as a limb b worker.