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In Pimlico Plumbers Ltd and another v Smith [2017] EWCA Civ 51, the Court of Appeal considered whether a plumber engaged by Pimlico Plumbers Ltd (Pimlico) was a self-employed contractor or a worker. 

Facts

Mr Smith worked for Pimlico as a plumber from August 2005 until his dismissal in May 2011. 
He brought a claim in the employment tribunal (ET), claiming that he was an employee of Pimlico and that he had been unfairly dismissed following a heart attack in January 2011. Mr Smith also claimed that his dismissal constituted discrimination on the grounds of disability and that he was entitled to holiday pay and sick pay during the period of a medical suspension. 

Mr Smith had signed an agreement with Pimlico that stated he was a self-employed contractor and that his work with Pimlico was governed by terms and conditions set out in Pimlico's Manual. The Manual stipulated that Mr Smith was required to work minimum weekly hours, wear a Pimlico uniform and use a Pimlico van (which he was required to rent from Pimlico). It restricted his ability to work for others and provided that he could not use other operatives to complete the work for him, other than by informally swapping jobs with other Pimlico operatives. While working for Pimlico, Mr Smith invoiced Pimlico for time worked, received payments gross of tax and National Insurance contributions and filed tax returns on the basis that he was self-employed.

Background

There are three main employment statuses under UK employment law: employee, worker and contractor (the latter being self-employed), each with different definitions and associated levels of statutory protection.

Which category a person falls into depends on a number of factors but the key principles are:

  • Personal service - whether the person is required to provide the service personally.
  • Mutuality - whether the employer is obliged to provide the person with work and, in turn, the person is obliged to undertake the work that is provided.
  • Control - whether the employer has the power to control the person by dictating how, when and where the work is to be carried out.

If all three of the above factors are present, the person will be an employee and benefit from all of the relevant protections under UK employment law, including the right to bring an unfair dismissal claim. 

Where personal service and mutuality are present but there is not sufficient control over the person, they will have worker status. Worker is an intermediate status between employee and contractor and gives some employment protections to those who fall short of employee status but who have a degree of subordination to the employer and cannot be said to be carrying on their own business, supplying their services to a customer (rather than an employer). Workers receive a lesser degree of employment protection than employees (for example, they cannot bring claims for unfair dismissal) but do receive some important entitlements and protections, including under the Working Time Regulations and National Minimum Wage Regulations, entitling them to receive paid annual leave and the national minimum wage or national living wage.

Where none of the above factors are present, the person will be a contractor in business on their own account and will be in a service-provider – client relationship, rather than an employer – employee/worker one. Consequently, they will not receive most of the protections or entitlements afforded to employees and workers under UK employment law.

In this case, Mr Smith claimed that he held the status of employee, whereas Pimlico claimed that he was a self-employed contractor. 

Employment tribunal decision

The ET considered Mr Smith's employment status as a preliminary point and held that he had the status of a worker, rather than an employee or a self-employed contractor.

The ET placed particular importance on the fact that Mr Smith's contract obliged him to carry out the work personally (as it did not allow him to provide a substitute) and that he was required to work a minimum of 40 hours per week, suggesting that he was a subordinate of Pimlico rather than being a contractor with Pimlico as his client.

The ET also said that the level of control that Pimlico exercised over Mr Smith was inconsistent with that of a contractor, noting that his contract contained restrictive covenants and prevented him from carrying out private work for contacts he made while working for Pimlico.

Pimlico appealed to the Employment Appeal Tribunal (EAT), arguing that Mr Smith was a contractor, and Mr Smith cross-appealed, arguing that he was an employee.

Employment Appeal Tribunal decision

The EAT rejected both appeals, agreeing with the ET that Mr Smith was a worker.

Pimlico appealed the decision to the Court of Appeal, arguing that the ET had erred in its decision-making and that it had not taken proper account of important factors in the case, such as the point that Mr Smith was VAT registered and was paid by Pimlico on the basis that he was a contractor.

Court of Appeal decision

The Court of Appeal rejected Pimlico's appeal. It held that the ET had given proper consideration to the relevant factors in the case and had been correct in finding that Mr Smith was a worker.

Pimlico has indicated that it intends to appeal the case to the Supreme Court. 

Comment

Employment status is currently a hot topic in employment law and this decision follows recent cases where ETs have found that an Uber driver and a Citisprint bicycle courier were workers rather than self-employed contractors. The Government has also launched the independent Taylor review of modern employment practices, to consider how UK employment law needs to change to keep up with the modern business models emerging from the sharing (or 'gig') economy.

While each case has been decided on its facts, the trend emerging from these cases appears to be that employment judges are increasingly willing to find that individuals have worker status where they are clearly in a subordinate relationship with the company, rather than in a business-to-business relationship. 

While Mr Smith received gross pay from Pimlico and enjoyed the advantages of being treated as a contractor, it was clear from the facts that Pimlico dictated the terms that he worked under, required him to provide his services personally, obliged him to work a minimum number of hours per week and exercised significant control over how he operated. It is therefore unsurprising that the Court of Appeal found him to have worker status.

There are likely to be many more high-profile cases of this type in the coming years, as case law catches up with rapid changes in how organisations source and engage with their workforce.

In the meantime, it would be advisable for organisations to review how they engage with contractors and ensure that they are satisfied that this status is appropriate.