The Court of Appeal has upheld the Employment Appeal Tribunal’s decision that one of Pimlico Plumbers’ operatives was a worker rather than self-employed. This is the highest court decision in a recent stream of cases involving similar claims from individuals against businesses including Uber, CitySprint and Addison Lee.
Pimlico Plumbers is a plumbing and maintenance company, which engages ‘operatives’ to carry out plumbing and maintenance work on its behalf. Mr Smith was one of those individuals who sought to bring claims in the Employment Tribunal against Pimlico Plumbers including unfair dismissal, wrongful dismissal and disability discrimination. His ability to bring these claims hinged on whether he could establish that he was an employee or worker of Pimlico Plumbers. Pimlico Plumbers contested that he was entitled to bring any of the claims on the basis that he was an independent contractor and therefore did not qualify for the relevant rights.
Although most people are familiar with the nature of an employment relationship, the conditions which give rise to a worker relationship are less well-known. The starting point is the definition in the Employment Rights Act 1996 which provides that the individual must enter into or work under:
a contract of employment, or
any other contract, express or implied, oral or in writing, whereby:
- the individual undertakes to do or perform
- any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
If the above criteria are fulfilled, the individual will be a worker. Therefore, employees are included within the definition of worker.
The Employment Tribunal at first instance found that Mr Smith was not an employee, but that he was a worker and that he was therefore entitled to bring those claims which required only worker status as a pre-requisite to bring the claim. The Employment Appeal Tribunal and now the Court of Appeal have upheld the ET’s decision.
The test of employment status involves a number of factors, including the nature of any written documents between the parties setting out their relationship, as well as how the relationship operates in practice. The Court of Appeal identified a number of factors that supported the finding of Mr Smith’s worker status including:
- that he did not have an unfettered right to substitute another to undertake his work – in practice, whenever substitution did occur it was always to another Pimlico Plumber ‘operative’. The Court of Appeal commented that “a right to substitute only with the consent of another person who has an absolute and unqualified discretion to withhold consent will be consistent with personal performance” and found the Employment Tribunal correct in its finding that Mr Smith provided his services personally.
- that the practical effect of certain documentation between Mr Smith and Pimlico Plumbers required Mr Smith to be available to take on work for a minimum of 40 hours per week, regardless of whether he actually worked all those hours or not.
- that the degree of control exercised by Pimlico Plumbers over Mr Smith was inconsistent with it being a customer or client of a business run by Mr Smith.
A new wave of cases relating to the ‘gig economy’ sector has brought the issue of employment status to the forefront, reflecting the friction in the sector between the business model’s need for a mixture of flexibility and certainty in relation to its workforce. Also clear is that crafting documentation which attempts to portray a relationship between these businesses and their workforce that does not reflect reality will not necessarily override the relationship which the factual situation indicates, with the Court of Appeal noting in relation to Pimlico Plumbers that there was a “carefully choreographed set of procedures and contractual documents designed to negate the appearance given to the public at large and its customers.”
It remains to be seen whether the government will decide to legislate further in this area. There is already a Cross-Government Working Group on Employment Status and the outcome of Matthew Taylor’s independent review of employment practices in the modern economy is awaited.
In the meantime, it would be sensible for employers in any sector – but particularly those in the ‘gig economy’ – who wish to use a self-employed workforce to review their working arrangements and to evaluate the risks they face of a challenge on employment status.