Pimlico Plumbers Ltd and anor. v Smith (Supreme Court)
The Supreme Court confirmed that a plumbing and heating engineer had been rightly categorised as a 'worker' for the purposes of claiming employment rights in circumstances where: (i) his ability to appoint a substitute to perform the relevant services was fettered; and (ii) the business which engaged him could not sensibly be described as his client or customer. Documentation which held him out as an independent contractor had been correctly disregarded for the purposes of determining his employment status.
The Respondent engaged the Claimant as an engineer for 5 years, on terms which purported to categorise him as an independent contractor and which required him to file tax returns on the basis that he was self-employed. In practice, however, the Claimant's role contained many elements generally seen in more subordinate employer-worker relationships. For example, he was required to carry an employer-issued ID card when performing his services, was required to perform a minimum number of hours a week, had to meet certain appearance standards (including wearing a prescribed uniform and using a Respondent-branded van) and was bound by significant post-termination restrictions.
With these factors in mind – and following his termination - the Claimant brought claims before an Employment Tribunal, including in respect of unpaid holiday pay and discrimination, which (broadly speaking) depend on his classification as a 'worker' under UK employment law. This statutory concept has three key components: (i) the individual must be engaged under a contract; (ii) the contract must require his personal service; and (iii) it must be performed in favour of a party whose status is not that of the individual's "client or customer". The Supreme Court agreed with all lower courts that the factual reality of the relationship fulfilled these conditions, and that the Claimant's formal "label" as an independent contractor within his engagement documentation should therefore be disregarded. In particular, focussing on the latter two components, it confirmed that:
- whilst a genuine, unfettered right to appoint a substitute to perform services on one's behalf is inconsistent with a requirement of personal service (and thus "worker" status), limited or occasional powers of delegation are not. In this case, the Claimant could only appoint a substitute from a relatively narrow pool of those individuals already engaged by the Respondent under separate terms. This circumscribed right could instead be characterised as a means of work distribution "akin to the swapping of shifts between a workforce" which did not negate the element of personal service necessary for worker status. Additionally, his written contractual terms were directed to him personally, referring to "your skills" and his personal competence to perform the work; and
- notwithstanding that the Claimant had the right to reject any particular offer of work, the Respondent did not reserve the right to supervise him or otherwise interfere with his work and he took on certain financial risks directly, the "severe" elements of control enjoyed by the Respondent over the Claimant's operations evidenced a subordinate relationship in fact which "betrayed a grip" on the Claimant's economy and which was inconsistent with the Respondent's classification as his client or customer. These included a requirement to follow administrative instructions from a "control room", restrictive payment terms and the broader factors set out above. Terms of the contract which referred to "wages", "gross misconduct" and "dismissal" were all taken into account as being suggestive of the Respondent's authoritative position as an employer.
In practice, this judgment presents few new lessons for employers. However, it does reiterate that employers cannot circumvent their employment law obligations by assigning an individual the status of an independent contractor in his or her written terms where this does not reflect the reality of the relationship; a move dismissed in this case as contractual "choreography". The decision again highlights how fact-specific outcomes in this area will be; the fact that a contract is drafted in the second person (e.g. "you", "we") could, for example, be taken to indicate a requirement for personal service. Following this decision, it will be interesting to see whether the government considers new legislative intervention (as recommended by the Matthew Taylor Review of Modern Working Practices) as the key to solving the perceived uncertainty in this area.