Matters of employment

The court of appeal decides Pimlico Plumbers isn’t self-employed

CHLOE THEMISTOCLEOUS

OVER the past few months, we have seen a flurry cases in the courts debating employment status; whether a person is self-employed, a worker or an employee. You may be wondering why status is so important and the simple answer is that each of these three groups has different rights, with the self-employed benefiting the least, employees the most, and workers sitting in between the two.

Status has come under the spot light recently as many people are finding themselves in short-term flexible working arrangements, without the protection of being an employee - what the media refers to as the ‘gig economy’.

The most recent case, decided in the court of appeal mid-February, involved Pimlico Plumbers and an individual, Gary Smith.

Smith worked solely for Pimlico Plumbers for nearly six years. After suffering from health problems and requesting to reduce his hours of work, he was dismissed.

Smith argued he was an employee and made claims in the employment tribunal for unfair dismissal, wrongful dismissal, arrears of wages, holiday pay and disability discrimination. Smith would only be entitled to make claims for unfair dismissal and wrongful dismissal if he was found to be an employee, and claims for discrimination, holiday pay and arrears of wages if he was a worker or employee. In some limited cases the self-employed may claim discrimination.

Pimlico Plumbers attempted to defend the case by alleging Smith was self-employed and therefore not entitled the make the claims.

Before the employment tribunal could decide Smith’s claims, it had to decide whether he was self-employed, a worker or an employee. To reach a decision the employment tribunal had to look at:

  • How much control Pimlico Plumbers had over plumbers work on a day-to-day basis;
  • Whether plumbers were required to undertake work personally or if they could provide a substitute; and
  • Whether Pimlico Plumbers was obliged to give plumbers work and whether they were obliged to accept it.
  • Where Pimlico Plumbers had little control over plumbers who were required to do the work personally without providing a substitute, and where Pimlico Plumbers had to offer plumbers work and who in turn had to accept it, the plumbers were likely to be employees.

But if Pimlico Plumbers had little control over plumbers who could substitute others, and there was no obligation to provide work or for work offered to be accepted, the plumbers were more likely to be self-employed.

Where Pimlico Plumbers had little control over plumbers who were required to do the work personally without providing a substitute, and where Pimlico Plumbers had to offer plumbers work and who in turn had to accept it, the plumbers were likely to be employees.

But if Pimlico Plumbers had little control over plumbers who could substitute others, and there was no obligation to provide work or for work offered to be accepted, the plumbers were more likely to be self-employed.

The problem for Pimlico Plumbers was that it gave the impression to customers that all plumbers were employees, requiring them to wear a Pimlico Plumbers uniform and drive a van with a Pimlico Plumbers logo on.

The plumbers were also given Pimlico Plumbers identification cards and mobile telephones. The plumbers were not, however, paid a salary like employees usually are and were instead required to raise invoices to be paid. Each plumber was VAT registered and personally accounted for their tax akin to someone who is self-employed.

However, Smith’s contract stipulated that he must work at least five days per week (a minimum of 40 hours) and if he wanted to take any holiday he must give Pimlico Plumbers notice. The contract also referred to Pimlico Plumbers being able to issue warnings and take disciplinary action against the plumbers, as well as them being bound to comply with the provisions of the company manual, which is not usual practice for the self-employed.

When Pimlico Plumbers revised its contracts in 2005, it also included a provision that plumbers were to give a weeks’ notice if they no longer wanted to work for the company, who could also do the same, as well as provisions restricting the plumber’s conduct after they no longer worked for the company (not to poach customers), both of which are more common with employees.

The employment tribunal concluded that Smith wasn’t self-employed nor was he an employee - he was a worker. This was largely due to the financial risk taken by Smith and because he was required to perform the work personally for a minimum number of hours per week. Smith was not able to substitute himself with another plumber, although plumbers could switch jobs with one another and obtain additional help.

On this basis, the only the claims for disability discrimination, holiday pay and arrears could continue as all others required Smith to be an employee.

Both parties appealed to employment appeal tribunal (EAT) which dismissed the case and upheld the tribunal’s decision.

Specifically, the EAT commented that the clauses regarding non-poaching of customers and the inability to provide substitute plumbers to undertake work were inconsistent with self-employed status however, employees did not generally take on the financial risk Smith had.

Pimlico Plumbers remained unhappy with the decision and appeal to the court of appeal, who agreed with both the Tribunal and EAT’s findings that Smith was a worker.

It is estimated that there are 125 others at Pimlico Plumbers in a similar situation to Smith and is it likely there are hundreds of thousands of people in similar situations elsewhere. Firms with individuals like Smith may find such workers may be entitled to more employment rights than either of parties anticipated.

Workers have the right not to be discriminated against, to be paid national minimum wage, holiday pay, arrears of wages and sometimes sick pay. It does not matter what the contract or paperwork says, the employment tribunal will look at the parties’ actions to identity the true nature of the relationship.

Employers should review their contracts if they are concerned that the contractual arrangement and actions of the parties are not consistent. They should also take advice to ensure they are not vulnerable to litigation.

Employers should always be careful when drafting contracts to ensure they’re clear and unambiguous and that they only offer the rights and entitlements they are required to.

A one-size-fits-all type contract is unlikely to be effective and may well result in costly litigation when individuals are unclear on their status. If an employer loses a tribunal claim of this nature it can lead to the requirement for widespread change throughout the organisation.

It’s worthwhile remembering an individual’s status may change over time and contracts should be updated if that is the case. Finally, the contract alone and the label we give to individuals is not definitive.
As we’ve seen above, the employment tribunal will consider actual working arrangements in detail to decide whether someone is self-employed, an employee or worker.

Chloe Themistocleous
Chloe Themistocleous is an associate in the employment department of Eversheds Sutherland

COPYRIGHT: MICHAEL COGHLAN FLICKR