Self-Employed Plumber Wins Worker Status

In 2010, Mr Smith suffered a heart attack. This prompted him to ask Pimlico Plumbers to reduce his working week from five days to three. They refused and terminated their relationship with him. Mr Smith said he had been dismissed and started his claims in the employment tribunal.

Pimlico Plumbers argued at the employment tribunal that Mr Smith was self-employed because he was registered for VAT, paid his income tax as self-employed and had signed agreements making it clear he was not meant to be an employee or a worker.

The employment tribunal and EAT both agreed that Mr Smith was a worker but not an employee. Pimlico appealed to the Court of Appeal and its judgment should now be seen as the leading authority on the law about employment status.

The Court of Appeal has not made any new law by its decision; rather it confirmed the importance of the existing case law principles that must be applied to the facts of each employment status case. There were a number of factors that the Court of Appeal explained made it clear that Mr Smith was providing personal service and was therefore at least a worker and not a genuine self-employed contractor. The key factors included:

• Pimlico Plumbers relied on poorly drafted documentation which was inconsistent and contained terms that were indicative of employment rather than self-employment. The court looked carefully at every provision and noted the words used such as “you shall” and “your obligation is to”. Such expressions pointed clearly towards Mr Smith having to provide personal service.
• The terms and conditions of the agreements that Mr Smith had to sign placed on him restrictions on when and where he could work.
• As much as Pimlico wanted him to be self-employed Mr Smith had to observe rules that effectively meant he had to work only for their customers, wear their uniform, drive their branded vans and follow their written Working Practice Manual procedures including calling Pimlico for all customer and work instructions.
• Whilst Mr Smith was not an employee the fact that he had to provide services personally made him a worker and the Court of Appeal set out its summary of the factors that are required for personal performance:
• An unfettered right to provide a substitute person to do the work or perform the servicers is inconsistent with personal service. However, a conditional right to provide a substitute may or may not be inconsistent with personal performance “depending on the conditionality.”
• The greater the fetter or restriction on providing a substitute the more likely this is a pointer towards personal performance.
• A right of substitution limited to only when the contractor is unable to carryout work will, “subject to any exceptional facts”, be consistent with personal performance. However, a right of substitution that requires the substitute to have the same qualifications or experience as the contractor will not be inconsistent with personal performance.
• If the right of substitution is subject to the “absolute and unqualified discretion” of the “employer” this will be consistent with personal performance.

The Court of Appeal recognised this case will be of interest to employment lawyers but warned that “employers” must take care to avoid trying to draw any very general conclusions from it. This is because employment status cases are fact specific and much depends on what happens in practice regardless of what the parties would like to happen! It is also worth bearing in mind that the factors that govern employment law status are not necessarily the same as those that decide income tax status. This may not be helpful to anyone but that is the current position. Mr Smith paid his income tax on a self-employed basis but he nevertheless has basic workers’ rights.

The Court of Appeal also warned employers against using lawyer drafted agreements that failed to reflect the true picture of the working relationship. Such agreements would be carefully scrutinised by the courts in favour of the individual.

The government has commissioned a review into the issue of workers’ rights in the “gig” economy which is looking at issues of job security, pension, holiday and parental rights. It is also looking at “employer freedoms and obligations”.  It will be interesting to see what changes will be recommended.

Simon Quantrill has particular expertise in helping clients correctly establish genuine self-employed working arrangements. Contact Simon to discuss how he can help your business make sure it does not become the next Court of Appeal decision.