On 13 June, the Supreme Court handed down its judgment in Pimlico Plumbers v Smith. As many expected, it upheld the Court of Appeal’s decision that Mr Smith, a plumber with Pimlico Plumbers, was a ‘worker’ entitled to certain rights and protections under UK employment legislation. The decision focused on two points:
- Was Mr Smith required personally to undertake the work? This is the essential component for categorisation as a ‘worker’. The key issue was whether Mr Smith’s limited right to substitute was inconsistent with an obligation of personal performance. The court held that it was not – the right was significantly limited because any substitute had to be another Pimlico Plumber.
- Was Pimlico a client or customer of Mr Smith? If it was, then even if Mr Smith was required to perform the work personally, this fact would stop him from being a ‘worker’. The Supreme Court upheld the finding that there was an umbrella contract between Pimlico Plumbers and Mr Smith – between assignments if Pimlico Plumbers had enough work to offer to Mr Smith it was obliged to give it to him and Mr Smith was required to keep himself available for up to 40 hours on five days each week. When coupled with the tight controls which were placed on Mr Smith (uniform, branded van with tracker, identity card, requirement to follow instructions of their control room) and the “severe terms” as to when and how much Pimlico Plumbers was obliged to pay him, this led the court to conclude that he was not a truly independent contractor, ie he was not ‘self-employed’.
This judgment is one of a series of recent, well-publicised judgments on employment status, but the first to reach the Supreme Court. As has been the case with the other employment status cases, the judgment is very fact-specific and should not directly result in a flood of claims being brought by employees with a similar fact pattern. The judgment does not add too much new thinking to the Court of Appeal decision but preserves the helpful points that the Court of Appeal made on the right of substitution and how the inclusion of a right of substitution in a services contract might affect the status of the individual concerned:
- If the individual has an unfettered right to substitute another person to do the work or perform the services, they will not be a worker.
- If there is a conditional right to substitute another person, this could mean that the individual is not a worker but it will depend on how limited or occasional the right is.
- If the right of substitution only applies if the individual is unable to carry out the work, this is consistent with the individual being a worker.
- If the only limit on the right to substitute is that the individual needs to show that the substitute is as qualified as they are to do the work, the individual will almost always not be a worker.
- If the right to substitute requires the consent of another person who has an absolute and unqualified discretion to withhold consent, this is consistent with the individual being a worker.
Employment status tests
The way in which the UK defines an individual as ‘employee’, ‘worker’ and ‘self-employed’ is under scrutiny. The government’s Employment Status Consultation paper (published in February and which closed on 1 June) asks numerous questions, including whether the employment status definitions should be codified in legislation and to what extent personal service should be the essential component to a finding of worker status. It is not clear when we can expect a government response to the consultation response – given the continuing Brexit negotiations it may be some time. If, when the response does come, it recommends legislation, there will be another consultation on the wording of the legislation – we expect that any legislative change in this area is well over a year away.
Holiday pay claims
One of the claims made by Mr Smith was for unpaid holiday pay to which he would have been entitled as a worker. Following a recent judgment, the miscategorisation of individuals as ‘self-employed’ when they are actually ‘workers’ could result in very significant costs for businesses if the miscategorisation went on for a number of years and they denied those individuals paid holiday during that time. In November 2017, the European Court of Justice (in King v The Sash Windows Workshop) held that a worker who has been wrongly categorised as self-employed and, on that basis has not been given paid holiday, may back claim for holiday pay in respect of any four weeks’ ‘EU’ holiday which they did not take during the time they were classified as self-employed and that this type of claim is unlimited in time. For our blog post on this judgment, please see here.
This ECJ judgment only relates to EU holiday which was not taken, however, not to EU holiday which was taken but unpaid. In order to claim for taken but unpaid holiday an individual would usually need to claim for a series of unlawful deductions from wages, and the look back period for these types of claims is subject to a two year cap (introduced in 2014). This cap did not apply to Mr Smith as he brought his claim before the cap came into force. The Sash Windows Workshop case has now been sent back to the Court of Appeal for judgment and will be heard in November 2018. When it does, the Court of Appeal may well comment on how lawful the two year cap is. If the cap is found to be unlawful on the grounds that it is inconsistent with EU law (and there are murmurings amongst commentators that this is a possibility), then a deluge, not a flood, of claims would follow.