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A recent decision in the Court of Appeal has thrown up another judgement relating to the status of workers in what is sometimes known as the ‘gig’ economy.

Background:

Mr Smith had signed a ‘self-employed operative’ agreement with Pimlico Plumbers (PP) in 2009, which contained detailed provisions relating to the performance of the services by Mr Smith. It provided that he would comply with all reasonable rules and policies of the company, including those contained in the company manual. The manual set out a requirement to work a normal week of 40 hours. Mr Smith was required to wear a PP uniform and had to drive a van leased from PP, although he provided his own tools and professional indemnity insurance. 

In the case, there were a number of factors that suggested that Mr Smith was neither an employee nor a worker (and was in fact a self-employed contractor):

  • His written agreement with PP described him as a “self-employed operative”.
  • There was no guarantee that PP would provide him with a particular amount of work.
  • He could choose which jobs he picked up, and the times at which he worked.
  • He provided his own tools and equipment.
  • He dealt with his own tax and national insurance (and was not subject to PAYE).

On the other hand, there were also factors that suggested a closer relationship between Mr Smith and PP:

  • He was required to wear PP’s uniform, which had its logo on it.
  • He had to use a van leased from PP.
  • His agreement with PP obliged him to work a minimum number of weekly hours.

One area of particular interest in the Judgement was the way in which the concept of substitution and personal performance of the duties was addressed. The Court of Appeal held that in this case there was no right of substitution and Mr Smith was obliged to provide the services personally.

For those interested in the detail, a copy of the Court of Appeal judgement can be found here: https://www.judiciary.gov.uk/wp-content/uploads/2017/02/pimlico-plumbers-v-smith.pdf

Learning points for employers:

  1. As this was a Court of Appeal decision its findings are binding on other similar cases – unless Pimlico Plumbers take the matter to the Supreme Court. If unsuccessful there they have the possibility of taking the case to the European Court of Justice – if the UK is still a member by that stage.
  2. Just because both parties agree that the individual is self-employed, this is not binding. It is the facts of the case that matter, not the name given to it.
  3. The right of substitution is a key issue in determining if someone is a worker or self-employed. If there is a right to substitute it must be a ‘real’ right, not just one that’s inserted into the contract. I suspect the Courts will look carefully at whether this right has been acted upon and whether there is a truly unfettered right of substitution.

Why does it all matter?

The risks from the employer’s perspective of getting the individuals’ employment status wrong include potential liability for tax and NI for the worker and claims from the worker for paid holidays, sick pay and protection from discrimination. Perhaps the worst aspect is the uncertainty that this brings for business planning.

The future

Recent Court judgements in cases involving UBER, Deliveroo and City Sprint Couriers all suggest that employment status is a growing issue with the tendency for individuals to be classified as workers as opposed to being self-employed. Of course from a Government perspective this may be seen as advantageous as it will result in increased tax and NI revenues. The Government has also commissioned a report into modern work practices which is looking at issues such as these. Now is the time for employers to review their strategy regarding employment status and consider if they have the most appropriate business model and contractual arrangements for the future.

If you want more information on employment status please call 01254 800930

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