A plumber who signed an agreement with his company suggesting that he was self-employed was in fact entitled to some worker rights, according to the Court of Appeal in Pimlico Plumbers Ltd and another v Smith.
The judgment has important implications for so-called “gig economy” employers that claim their workers undertake services on a self-employed basis and that they effectively run their own businesses.
Mr Smith worked as a plumber for Pimlico Plumbers from 2005 until 2011. The agreement between the company and Mr Smith described him as a “self-employed operative”.
The wording of the contract suggested that he was in business on his own account, providing a service to Pimlico Plumbers.
Mr Smith was required under the contract to wear Pimlico’s uniform (which displayed the company’s logo), use a van leased from Pimlico (with a GPS tracker and the company’s logo), and work a minimum number of weekly hours.
However, he could choose when he worked and which jobs he took, was required to provide his own tools and equipment, and handled his own tax and insurance.
There was no express term in the agreement allowing Mr Smith to send someone else to do the work. However, there was evidence that plumbers could swap jobs, described as “more akin to swapping a shift between workers” than substitution.
Pimlico Plumbers did not guarantee to provide Mr Smith with a minimum number of hours. Following the termination of this arrangement, Mr Smith brought claims for unfair dismissal and disability discrimination.
The employment tribunal found that he could not claim unfair dismissal because he was not an employee.
However, the tribunal decided that he could claim disability discrimination as a “worker”, whereby an individual undertakes to do or perform personally any work or services for another party to the contract.
The Employment Appeal Tribunal (EAT) agreed with the employment tribunal, and the Court of Appeal has now dismissed Pimlico Plumbers’ appeal.
In dismissing the appeal, the Court accepted that the original employment tribunal had been entitled to stand back and looked at the arrangement as a whole.
According to the Court, the employment tribunal had been right to regard Mr Smith as “an integral part of [Pimlico Plumbers’] operations and subordinate to [Pimlico Plumbers]”.
The employment tribunal was entitled to regard Pimlico Plumbers as more than just a “client or customer of Mr Smith’s business”.
Unlike recent high-profile judgments involving Uber drivers and CitySprint couriers, this ruling is binding on other courts and tribunals.
This means that the Court of Appeal decision in Pimlico Plumbers Ltd and another v Smith is likely to be a key authority in any forthcoming cases on employment status in the gig economy.
After the ruling, Charlie Mullins, founder and chief of Pimlico Plumbers, said the company had changed contracts with those who worked on a self-employed basis. “Like our plumbing, now our contracts are watertight,” he said.
Glenn Hayes, an employment partner at Irwin Mitchell, said: “We are seeing increasing numbers of individuals challenging their status and claiming to be workers or employees.
“CitySprint couriers and Uber drivers recently persuaded separate tribunals that they were workers and although Uber is now appealing this, tribunals are clearly taking a pragmatic and bold approach to determining status cases, despite contractual arrangements which are designed to give the appearance that individuals are genuinely self-employed.
“The outcome of this case is very significant and could make it more difficult for Uber and others to persuade the courts that its drivers are genuinely self-employed.”
Yvonne Gallagher, employment partner at law firm Harbottle & Lewis, said it was important to note that this case did not find that the plumber was an employee of Pimlico Plumbers.
“Those categorized as workers have a right to minimum wage and to paid annual leave, along with some other procedural rights, such as a right to be accompanied at any form of disciplinary meeting,” she explained.
“But they do not enjoy the full range of protections given to employees and perhaps as importantly, are not subject to the PAYE system applicable to employees.”
However the judgment included a warning to commentators: “Although employment lawyers will inevitably be interested in this case – the question of when a relationship is genuinely casual being a very live one at present – they should be careful about trying to draw any very general conclusions from it.”
General secretary of the TUC Frances O’Grady said: “This case has exposed once again the growing problem of sham self-employment.
“Unscrupulous bosses falsely claim their workers are self-employed to get out of paying the minimum wage and providing basics like paid holidays and rest breaks.”
Other gig economy cases
Uber is appealing against the high-profile employment tribunal decision that the drivers who brought the claim are workers rather than self-employed.
This means that they are entitled to receive some basic employment rights, such as the national minimum wage and paid annual leave.
A similar finding when the Uber case goes to the EAT would be bad news for the company, as it could lead to it having to radically overhaul its contractual arrangements with its drivers.
In another recent case about employment status in the gig economy, the employment tribunal found that a CitySprint courier is a worker rather than self-employed.
In both cases, the employment tribunals were highly critical of the contracts that the workers were asked to sign.
The employment tribunals saw the contracts as drafted in a deliberately complex manner to mask the true nature of the working arrangements.
There are also a number of other outstanding legal challenges with courier companies including Hermes, Addison Lee, Excel and eCourier.
The Government is currently conducting a review into workers’ rights in the gig economy, led by Matthew Taylor, chief executive of the Royal Society for the Arts.