It is important to decide whether someone is an employee or a worker, as they enjoy different employment rights. In Pimlico Plumbers Ltd v Smith, the Employment Appeal Tribunal (EAT) held that the tribunal had been entitled to find that a self-employed contractor who was subject to a high level of control by his employer was a worker and not an employee, and could therefore only claim limited employment rights.
Basic facts
Although ostensibly a self-employed contractor for Pimlico Plumbing, Mr Smith had to wear the company uniform and drive a van with its logo. Contracts and estimates for clients were issued in the name of the company and payment was made to Pimlico. He was not allowed to provide a substitute for the services he had agreed to provide, although in practice operatives would sometimes swap jobs round as well as shifts.
Mr Smith, however, had to provide all his own tools and equipment as well as indemnity insurance. He could only be paid against receipt of an invoice and had to pay his own income tax, VAT and social security contributions. Although he had to work a minimum number of hours per week, he could choose the hours he worked and could reject particular jobs. Pimlico did not have to provide him with work if none was available.
Mr Smith made a number of claims, including unfair and wrongful dismissal, which required him to show he was an employee, as opposed to being self-employed. He also made claims of disability discrimination and unauthorised deductions of wages for which he had to show he was a worker.
Relevant law
Under section 230(3) of the Employment Rights Act a worker is someone who (a) works under a contract of employment; or (b) works under any other contract “to do or perform personally any work or services for another party to the contract” unless that party is a client or customer of a business or profession.
Tribunal decision
The tribunal held that Mr Smith was not an employee as the company did not have an obligation to provide him with work. In addition, he made full use of the tax advantages of being self-employed. It did not, therefore, have jurisdiction to hear the claims that required employee status.
However, it found that he was a worker under section 230(3)(b) as he did not work for anyone other than Pimlico and there was no evidence he sought to do so or marketed his services. As the judge did not think he was in business on his own account, he was a “limb b” worker which meant that his discrimination and deductions from wages claims could be heard.
Both parties appealed.
EAT decision
The EAT agreed with the tribunal on both counts. In terms of his status as an employee, it held that the financial risks that Mr Smith faced (for instance, he would not get paid if an invoice remained outstanding after six months or if he underestimated the cost of carrying out a job) were not characteristic of someone with a contract of employment. In addition, he had a considerable degree of autonomy in relation to quotations as well as the way in which he carried out work. It was also significant that both parties acted as though he were self-employed. The employment tribunal was therefore right to find that Mr Smith was not an employee.
The EAT also held that the tribunal was entitled to conclude that Mr Smith was a worker as he was required to carry out the work himself. Although operatives swapped jobs and shifts around as a means of distributing work among the operatives, this was an informal practice that Pimlico tolerated but without any legal obligation to do so. As this did not amount to an unfettered right to substitute himself with someone else, Mr Smith could qualify as a worker.