The Court of Appeal issued a decision last week in the case of Pimlico Plumbers & Charlie Mullins v Gary Smith. It is anticipated that this case will become the main authority on the legal issues surrounding whether a person is self-employed, employed or in the middle category of worker.
Legal status is a matter with which courts and tribunals have grappled for years. Why is it important? Well, it all boils down to legal rights. Self-employed contractors have fairly limited legal rights under employment law. Workers have more rights but not as many as employees who have the most legal protection. For example, employees have the right to minimum notice periods, statutory redundancy pay and can claim unfair dismissal after two years’ service. Workers do not have these rights, but do share some rights in common with employees such as pension auto enrolment, the right to paid annual holidays and national minimum wage (none of which are available to self-employed contractors).
Hot on the heels of a number of recent decisions involving the legal status of those working in the gig economy (Uber, CitySprint), the Pimlico Plumbers decision brings the matter of status to the fore once again. Mr Smith worked for Pimlico for a number of years. He was self-employed for tax purposes and did his own VAT returns. He penned an agreement which committed him to minimum weekly working hours, required him to wear a uniform and drive a branded van, provided that he could only use other Pimlico Plumbers to substitute work and limited his entitlement to work for other businesses.
Mr Smith raised tribunal claims and he was found not to be self-employed (as contended by the business) but a worker. A worker is someone who undertakes to “do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried out by the individual”. He was also found to be in the extended category of employee (required for discrimination claims) which includes persons employed under a contract personally to do work. He was not, however an employee in the sense of holding the full suite of legal rights.
The Master of the Rolls stated that “the case puts a spotlight on a business model under which operatives are intended to appear to the clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker”.
The relevant considerations:-
- Mr Smith was under an obligation to provide his services personally (true self-employed persons not being under such an obligation);
- Minimum weekly working hours (true contractors are supposed to have autonomy as to when they work);
- There was no express unfettered right for Mr Smith to send a substitute to do the work in his place;
- Evidence suggested that Pimlico had very tight control over Mr Smith in many aspects;
- He had to wear their uniform and drive their van;
- The agreement which he entered into restricted him from working as a plumber in the area for 3 months after termination with Pimlico.
The Court of Appeal reached a conclusion that the personal obligation to perform services and the degree of control exercised by Pimlico was inconsistent with their argument that Pimlico was a client of a business being run by Mr Smith.
If you are in any doubt about the legal status of those engaged by your business and want to avoid a “drain” on your legal resources, take advice from Blackadders Employment Team.
If this case proves at least one thing, this important legal principle is not just “water under the fridge”.