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Another blow to the Gig Economy?

The Supreme Court has upheld the Employment Tribunal’s decision in Pimlico Plumbers v Gary Smith that Mr Smith was classed as a “worker” under section 230(3) of the Employment Rights Act 1996.

Background

Mr Smith worked for Pimlico Plumbers Limited (“Pimlico”) as a plumbing and heating engineer. Pimlico stated that he was classed as a self-employed contractor. Following a period of ill-health, Pimlico terminated the relationship with Mr Smith. Mr Smith subsequently issued proceedings against Pimlico including allegations of unfair dismissal, unlawful deduction from wages and disability discrimination.

The Law

There are three main categories of employment status:

  • Employee
  • Worker
  • Self-employed

To meet the definition of worker status under the Employment Rights Act 1996 there are three components:

  • There must be a contract;
  • The contract must require personal service; and
  • The other party must not be a customer or client of any business undertaking or profession carried on by the individual.

Different employment statuses convey different levels of employment protection upon the individual. An employee has higher protections than other employment statuses such as the right to not be unfairly dismissed and the right to be paid redundancy payments.

A worker has more basic statutory protections such as entitlement to paid annual leave and protection from unlawful deduction from wages.

It is therefore important to correctly determine the employment status an individual holds in order to ascertain what rights are conveyed upon them.

Decision

Although the Employment Tribunal (“ET”) found that Mr Smith had not been an employee of Pimlico and therefore could not claim unfair dismissal, it found that he had been a worker.

Pimlico brought appeals against this decision in the Employment Appeal Tribunal (“EAT”) and Court of Appeal (“CoA”) but both appeals were dismissed. Pimlico finally appealed to the Supreme Court.

The two key questions were:

  • Was there an obligation on Mr Smith to personally perform work?
  • Was Pimlico a customer or client of Mr Smith?

In relation to the first question, the Supreme Court assessed whether the dominant feature of the contract was an obligation to perform work personally. Considering Mr Smith’s right of substitution (which was limited as he could only substitute with another Pimlico plumber) the Supreme Court held that the right was so insignificant it was not worthy of recognition in Mr Smith’s contract.  On the facts, Mr Smith had been required to perform the services personally.

In relation to the second question, the Supreme Court held that the terms of the contract such as the requirements to wear uniform, use a branded van and carry an ID card as well as the company control over payment terms indicated that Mr Smith was not an independent contractor and that there was no customer or client relationship between Mr Smith and Pimlico.

Comment

This decision affirms the position in the recently well-publicised Uber case and has important implications for gig-economy workers as the decision is binding on other Tribunals.

Being able to establish employment status is a crucial step in being aware of the employment rights which are afforded to an individual. Acting in breach of these rights can then lead to costly disputes and claims for breaches of employment rights.

Recommendations from the recent Taylor Report highlight the need for clarity over employment status and government recommendations have recently been consulted upon to determine how best to achieve this. In the meantime, if you hire individuals on contracts similar to the Pimlico plumbers, you may wish to review your contractors’ status to ensure the terms of their contract as well as the reality of the working relationship align and point to a true self-employed status, to avoid such dispute and any associated tax implication.  If in doubt, you can contact us on 01912822881 and we will be happy to review your contracts.

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