A plumber has won a legal battle that could have a significant impact for many freelance workers across the UK.
Pimlico Plumbers has an appeal refused by the Supreme Court, and the unanimous decision that heating engineer, Gary Smith, is a worker as opposed to a self-employed contractor will be important for many other so-called 'gig economy' workers.
The judgement issued this week could influence the outcome of other ongoing legal battles in this area such as those concerning Uber, Deliveroo and Addison Lee.
Mr Smith carried out work solely for Pimlico Plumbers from August 2005. The relevant contractual documentation stated that he was an independent contractor, in business on his own account and that Pimlico Plumbers were not obliged to offer him any work. Further, Mr Smith was under no obligation to accept any work which was offered.
Crucially, however, a separate provision existed in the company's manual which stated that individuals such as Mr Smith should complete a minimum of 40 hours' work a week. Additionally, Mr Smith was required to hire and drive a branded van and wear a uniform. While there was no express right of substitution in the relevant documentation, it was common practice that the plumbers could swap assignments between themselves. Mr Smith was, however, responsible for his own tax and NI and was VAT registered.
In 2011 Mr Smith's arrangement with Pimlico Plumbers was brought to an end by Pimlico after he had suffered a heart attack and had subsequently had a period of absence. Mr Smith raised proceedings in the Employment Tribunal for a failure to pay holiday pay, unlawful deductions from wages, disability discrimination and a failure to make reasonable adjustments, among other things.
Was Mr Smith to be regarded as a worker for the purpose of the legislation governing these rights?
He has been successful in persuading the court of his worker status at every stage. When the Court of Appeal failed to find in Pimlico's favour, they appealed to the Supreme Court.
Supreme Court decision
The Supreme Court dismissed Pimlico's appeal. The judgment acknowledged that there were some aspects of the agreement which pointed towards self-employment, such as the entitlement to refuse work, but other aspects “betrayed a grip on his economy inconsistent with his being a truly independent contractor”. These included the fact that he was required to wear a branded uniform, had a tracker in his branded van and carried a Pimlico Plumber's identity card. Furthermore, his contract made reference to “wages”, “gross misconduct” and “dismissal”. These factors, when considered in their entirety, were enough to point to Mr Smith being a Pimlico Plumber worker as opposed to a self-employed contractor.
The Supreme Court placed a particular emphasis on the fact that Mr Smith had no express right of substitution – that is, the ability to appoint another person to do a job he had previously quoted for but no longer wished to undertake. While in reality operatives did in fact swap jobs amongst themselves, the terms of the contract between the parties clearly directed to performance by Mr Smith personally. The Supreme Court pointed to the fact that any right to substitute was significantly limited by the fact that the substitute had to be another Pimlico operative. This factor, combined with the fact that the contract made frequent reference to the personal performance of Mr Smith (i.e. frequent reference to 'your skills'), was enough to assert that the dominant feature of Mr Smith's contract was that of personal service.
Cases such as this - along with others concerning the interaction between worker status and provisions relating to holiday pay, minimum wage entitlement and protection from discrimination - continue to try to delineate tricky parameters in the 'gig economy'.
With around 4.8 million contractors in UK who could potentially be affected by this decision, the possible ramifications for businesses (and the individuals working for them) are huge.
If you have people within your organisation that you class as independent contractors or workers you may wish to review your documentation and practices in line with recent case law to ensure that your workforce classifications are correct and defensible. Our employment law experts are on hand to help with this.