In order to bring certain tribunal claims, claimants have to show they are workers as opposed to self-employed contractors. In Pimlico Plumbers Ltd and anor v Smith, the Supreme Court held that a plumber who was ostensibly self-employed was a worker because of the degree of control that the company exercised over him.

Basic facts

Mr Smith worked for Pimlico Plumbers (PP) from 2005 to 2011 under two agreements which he signed in 2005 and 2009. The agreements together provided that he was “an independent contractor of the Company, in business on his own account…” and that the Company was under no obligation to offer work nor was he under an obligation to accept work. However another term provided that he was expected to be available for a minimum of 40 hours a week and he had to carry out the work himself unless he could find another Pimlico operative to do the work in his place.

On the other hand, he had to provide his own tools and bear some of the commercial risks. For example, if a customer did not pay or was late in paying for more than six months he would not get paid. He was also required to pay his own income tax and National Insurance and presented monthly invoices to PP for VAT.

Following his dismissal, Mr Smith brought a number of claims which, inter alia, required him to prove that he was a worker under section 230(3)(b) of the Employment Rights Act 1996 (ERA).

Relevant law

Section 230(3)(b) states that a "worker" is an individual who works under a contract and undertakes to “do or perform personally 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”.

Decisions of lower courts

The tribunal agreed that that Mr Smith was a worker under section 230(3)(b), as did the EAT (weekly LELR 405). The Court of Appeal agreed, holding that it was clear from the evidence that Mr Smith had to do the work personally. The tribunal found that he had a limited facility to substitute, for example he could arrange for another Pimlico plumber to do the job.

It was also clear the degree of control exercised by PP was inconsistent with it being a customer or client of a business run by Mr Smith. In particular, the restrictive covenant imposed by PP which precluded him from working as a plumber in any part of Greater London for three months after the agreement came to an end (weekly LELR 512).

Supreme Court decision

Although Mr Smith had a limited right to substitute, the Supreme Court held that “the dominant feature” of his contract involved an obligation to personally carry out the work. In particular, his contract referred to “your skills”, to a warranty that he was competent to perform the work and to a requirement of “a high standard of conduct and appearance”. In addition he had to wear a uniform and carry an ID card, all of which were requirements addressed to him personally.

In order to decide whether Pimlico was a client or customer of Mr Smith’s, the Court looked at the wording of the contractual documents. These showed that, on the one hand, Mr Smith was free to reject an offer of work but at the same time he had to be available for a minimum number of 40 hours per week. The Court considered this indicated he was engaged under an umbrella contract.

The evidence also showed that PP exercised tight control over Mr Smith including very severe terms on when and how much it was obliged to pay him. The Court therefore upheld the tribunal’s decision that Mr Smith was a worker. As this was the decision of the Supreme Court no further appeal is possible.

Comment

This case and that of Addison Lee v Gascoigne (also summarised in this LELR) are part of a series of recent cases on bogus self-employment. This happens when employers seek to categorise those working for them as “self-employed independent contractors” in order to reduce their costs and deny basic employment rights to workers such as:

  • the right to paid holidays
  • protection from discrimination; and
  • the right to bring a claim for unpaid wages in the employment tribunal.

A common tactic of employers is to write into the contract that the individual is “an independent contractor and that nothing shall render them an employee, worker or agent”. Oher common clauses include providing a right of substitution and denying any obligation to provide and accept work.  

Ultimately whether someone is a worker or genuinely self-employed is a question of fact for the courts to consider. Employers who seek to draft contracts which attempt to present to the public that those working for them are part of the workforce while at the same time claiming that they are self-employed are increasingly being challenged. Following the decision in Autoclenz v Belcher (weekly LELR 229) the courts will carefully examine whether the terms of the contract or agreement truly represents the reality of the working relationship.

It is clear that until employment status is reformed those who are engaged on bogus self-employed contracts will continue to challenge employers who seek to deny them basic employment rights.However, as each case is dependent on its own facts it is unlikely that the cases will provide the much-needed clarity on employment status.

The government launched a number of consultations earlier this year following the Taylor Review (see Spring LELR 2018) including how employment status could be made clearer for individuals and businesses. In our response Thompsons called on the government to:

  • use section 23 of the Employment Relations Act 1999 to extend to “workers” rights which are currently limited to “employees”
  • simplify the definition of worker status
  • put the burden of proof on the employer to prove that someone is not a worker.