Summary: The Court of Appeal’s decision in the Pimlico Plumbers case is the latest in a line of recent employment status cases, many involving the gig economy, which have decided that “self-employed” individuals are actually “workers” for employment law purposes. This means the individuals are entitled to claim certain employment rights such as holiday pay and discrimination protection.

The Court of Appeal in Pimlico Plumbers and another v. Smith has decided that Mr Smith, a plumber, was a “worker” rather than independent contractor. He is therefore entitled to pursue his claims for holiday pay, arrears of pay and disability discrimination against his employer, Pimlico Plumbers (PP).

In order to claim “worker” status, an individual must show that:

  1. they are obliged to perform the work personally, and
  2. the person for whom the work is done (in this case, PP) is not a client or customer of the business carried on by the individual.

Mr Smith had to do the work personally. He did not have an unfettered right to send someone else in his place. He therefore satisfied the first requirement.

In relation to the second requirement, the Court of Appeal said Mr Smith was an integral part of PP’s operations and subordinate to PP, who exercised a considerable degree of control over him. Among other things, he had to work a minimum number of hours per week, he had to comply with standards of conduct and appearance, and he was subject to onerous restrictive covenants. He therefore had a "worker" relationship with PP rather than a self-employed/client relationship.

Employment status - practical issues for employers

This case is the latest example involving a business model in which operatives are intended to appear to clients of the business as working for the business, but at the same time the business argues that, as between itself and its operatives, the operatives are self-employed rather than employees or workers.

The Court of Appeal stressed employers should be careful not to draw any very general conclusions from this case. Determining someone’s employment status is fact specific. However, there are useful points to note, not least:

  • the contractual terms governing the relationship in this case were “contradictory and ill thought-out”. This is a salutary reminder to employers to review the terms on which they engage staff and make sure they are clear and consistent.
  • there were various factors pointing towards self-employed status in this case, for example during the six years that Mr Smith worked for PP, both parties believed he was self-employed, he was treated as self-employed for tax purposes and he bore the risk of various business expenses. However, these were outweighed by factors pointing the other way.

Employment status remains a hot topic this year. Among other things, the government’s Independent Review of Employment Practices in the Modern Economy is considering employment status issues and is expected to publish its recommendations in June 2017.