This case is particularly interesting given the rising trend of ‘gig’ economies and the increasing difficulty in defining the differences between an employee, a worker and a self-employed individual in the UK. The Court of Appeal ruled that Mr Smith in this case was a worker and that there can be a difference between an individual’s employment and tax status.

In this case Mr Smith was found to be a worker and despite being regarded as self-employed for tax purposes, was in employment as per the Equality Act 2010 and was entitled to basic rights. Therefore he could bring claims in respect of discrimination and holiday pay.

Background

Pimlico is a plumbing and maintenance company with 75 office staff and 125 contractors. One of the contractors was Mr Smith. Mr Smith is a plumber and carried out plumbing work for Pimlico between August 2005 and April 2011. Pimlico terminated the contract in April 2011 and Mr Smith put forward a claim for unfair and wrongful dismissal. Unfair dismissal is generally only available to employees so the Courts had to determine his employment status. Mr Smith also brought claims for entitlement to pay during medical suspension, holiday pay, arrears of pay and discrimination arising from disability.

By way of background, a written contract was entered into in August 2005 between Pimlico and Mr Smith. The agreement described Mr Smith 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 accounted for his own VAT, income tax and social security contributions. He also provided all of his own tools and materials in order to carry out his work. The contract required Mr Smith to wear a Pimlico uniform and drive a van with Pimlico branded on it which was fitted with a tracking device. He could only be contacted by customers through the company. Shifts could be swapped with other operatives but he could not send a substitute without written authority from Pimlico. Once he worked a certain minimum number of hours per week, Mr Smith could choose when he worked and what jobs he was willing to accept. He had to give adequate notice of holidays and time sheets had to be completed.

Decision

At the Employment Tribunal, it was found that while Mr Smith was not an employee, he was a worker for two reasons:

1. He could not provide a substitute to Pimlico if he was unavailable for work. While he was allowed to swap shifts, he was required to provide work for Pimlico personally; and
2. Mr Smith could not regard Pimlico as a client of his business. The relationship was more likened to that of a principal.

As a worker, Mr Smith, while not entitled to make an unfair dismissal claim, he was entitled to bring claims of direct disability discrimination, discrimination by reason of failure to make reasonable adjustment and holiday pay.

In light of the decision by the Employment Tribunal that Mr Smith was a worker, Pimlico brought the case to further appeal in the Court of Appeal. The Court of Appeal agreed that Mr Smith was a worker and stated that this case “puts a spotlight on a business model under which operatives are intended to appear to 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”.

Conclusion

This case is likely to be a key authority in forthcoming cases particularly in an era where increasing numbers of individuals are challenging their status and claiming to be workers or employees.

It is important to note that this case did not find that Mr Smith was an employee of Pimlico Plumbers; rather a worker and this is a critical distinction. While workers have a right to minimum wage and paid holidays, they are not subject to PAYE and do not have the full protections available to employees.

Key points which point towards worker status as are follows

• Minimum working hours are required;
• The individual has no right to provide a substitute;
• There are restrictions on the ability to work for other companies; and
• The company has some control over the individual. The situation could not be regarded as a customer relationship.

Full judgement is available https://www.judiciary.gov.uk/wp-content/uploads/2017/02/pimlico-plumbers-v-smith.pdf