An individual’s employment rights in Britain vary depending on the nature of the employment relationship. The recent Court of Appeal case of Pimlico Plumbers Limited and anor v Smith considered whether or not someone described as self-employed could be considered an ‘employee’ or a ‘worker’. If the individual were genuinely in business on their own account, they would have no employment rights.
The court noted that this case “puts a spotlight on a business model under which operatives are intended to appear to clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent
contractor, rather than employer and employee or worker.”
Self-employed, employee or worker?
Gary Smith was engaged as a plumber for Pimlico Plumbing Ltd under an arrangement that described him as an independent contractor. Mr Smith was able to choose his own hours, reject and accept jobs depending on location, worked unsupervised and could negotiate prices with customers. Mr Smith’s accountant dealt with any taxes that fell due. Mr Smith did, however, have to wear the Pimlico company uniform, lease a van from Pimlico and work a minimum number of weekly hours.
Mr Smith suffered a heart attack in 2011, which led to the arrangement being terminated. He brought claims against Pimlico for unfair dismissal, wrongful dismissal, holiday pay, unlawful deduction from wages and disability discrimination.
To succeed with all the claims, Mr Smith had to establish that he was an ‘employee’. However, Mr Smith would also have had some rights if he could show he was a worker. The
Employment Rights Act 1996 (ERA) explains the difference between the two terms as:
– An employee is someone “who has entered into work under a contract of employment”; and
– A worker is someone “who has entered into work under a contract of employment or any other contract whereby the individual undertakes to do or perform personally any work/services for another party.”
Section 230(1) and (2) of the ERA
Employment Tribunal decision
The tribunal decided that Smith was not an ‘employee’ because there was no obligation for Pimlico to provide work under the agreement or to pay Mr Smith for the work carried out. This prevented Mr Smith from being able to claim unfair dismissal.
However, the tribunal found that he was a ‘worker’ within section 230 of the ERA and the Working Time Regulations 1998 and met the definition of ‘employment’ under the
Equality Act 2010. The requirement for Mr Smith to carry out a minimum number of hours’ work each week personally for Pimlico, without freely substituting another, distinguished him from someone who is self-employed and carrying on a profession entirely on their own account, entering into contracts with clients to provide work for them. The control Pimlico could exercise over Mr Smith, including preventing him from working for other clients, was inconsistent with Pimlico being a client of his business.
This finding meant that Mr Smith could bring claims for disability discrimination, unlawful deduction from wages and holiday pay.
Pimlico appealed the decision to the Employment Appeal Tribunal unsuccessfully.
Court of Appeal ruling
Pimlico appealed further to the Court of Appeal. The court agreed that Mr Smith was a worker. When dismissing the appeal, the court accepted that the tribunal was right in taking a look at the arrangement as a whole and considering Pimlico as “more than just a client of Mr Smith’s business” and considered Mr Smith an “integral part of Pimlico Plumbers.”
This case is set to be a precedent in upcoming cases concerning employment status within gig-economy businesses – those that recruit independent workers on short-term engagements – such as Uber and Deliveroo, with increasing numbers of people challenging their status by claiming to be either workers or employees. In this case, the deciding factor related to Mr Smith’s ability to bring in a substitute to do his work. Where a business provides uniforms or branded equipment to someone carrying out work for them who is allegedly self-employed, the tribunal will look very carefully at the arrangements when determining whether the agreement gives rise to worker rights.
For more information on any of the issues raised in this article, contact our Leeds Employment Team or calling 0113 368 6161.