Landmark Supreme Court decision in the Pimlico Plumbers case

The long awaited decision has been delivered by the Supreme Court in Pimlico Plumbers Limited and anor -v- Smith where it has been held than an employment judge was entitled to conclude that a plumber who worked under a contract where he was described as an independent contractor was in-fact a worker.

The facts of the case are that Mr Smith entered into a contract with Pimlico Plumbers as an independent contractor providing plumbing and heating engineer services and this was confirmed in a written contract.   It also stated that he was in business on his own account, and that Pimlico Plumbers were  not obliged to offer any work and that Mr Smith was under no obligation to accept any work.

The written contract also set out that Mr Smith should complete a minimum of 40 hours per week work, had to drive a van bearing the logo of the company and wear a uniform with the same logo.

Importantly there was no express right of substitution where Mr Smith could substitute another plumber to undertake his work, although the Pimlico Plumbers could swap work arrangements between themselves.

Pimlico Plumbers terminated the arrangements with Mr Smith on 3 May 2011 and he then issued claims in the employment tribunal for failure  to pay holiday pay, unlawful deductions from wages and disability discrimination.

The Employment Tribunal had to determine whether Mr Smith was a worker for the purpose of his holiday pay and unlawful deduction of salary claims and an employee for his disability discrimination and equality act  claim.

At first instance the Employment Tribunal held that Mr Smith was a worker and an employee for these purposes.   It held that the main purpose of the written contract was for Mr Smith to provide work for Pimlico Plumbers and that he did not have an unfettered right to substitute at will.  He was therefore obliged to provide his services and was therefore a worker.

Pimlico Plumbers appealed the decision to the Employment Appeal Tribunal and then the Court of Appeal where the appeals were dismissed.

This brings us to the latest appeal to the Supreme Court which has also dismissed the appeal.  The Supreme Court held that the original employment judge had been entitled to find that Mr Smith’s only right of substitution was another colleague at Pimlico Plumbers and that this limited right of substitution was not inconsistent with an obligation to perform services personally.

Other important factors that swayed the decision that Mr Smith was a worker was the requirement to wear a uniform bearing the logo of Pimlico Plumbers, drive their van with their logo, the necessity of carrying  an identity card and following instructions from its control room.  There were also references in the written contract to ‘wages’, ‘gross misconduct’ and ‘dismissal’ and restrictive covenants controlling Mr Smith’s activities in the event of the termination of the arrangements.   The language is  consistent with an employment relationship.

Rather predictably Charlie Mullins of Pimlico Plumbers said ‘The shame of all of this is that it is currently accepted that current employment law is not fit for purpose, and needs to be changed.  But when it’s put to the test in our highest courts there isn’t even the slightest suggestion that there is a problem that needs to be addressed.  This is a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago.  It can only lead to a Tsunami of claims’.

It could also be argued that many businesses like Pimlico Plumbers do not understand employment law and the boundaries between employment and self-employment.  Charlie Mullins statement about companies ’employing millions of contractors’ is also inconsistent.

The message from the Courts are  that Companies who engage contractors in the Gig economy really ought to ensure that the relationship that they are creating in reality actually mirrors the day-to-day activities.   This model can work but only if contractors are truly self-employed with no mutuality of obligation for example to have to accept work, with a right to substituting  other contractors.   Contractual documentation also needs to be carefully tailored to ensure that the language is consistent with true self-employment/contractor status.

It is our observation that many companies like Pimlico Plumbers are attempting to cut corners and deny employment rights by taking on contractors who they still wish to control in terms of the work that they carry out and the hours that are worked.

It will no doubt be left to the Government to tackle these developments and to legislate  to make it clear that those working in the ever evolving Gig economy do have rights and will be classed as workers, thus providing employment protection rights that come with that status  for example to holiday pay, and  national minimum/living wage.

If you have any questions in relation to worker status and the Gig economy then contact Steven Eckett, Head of Employment at Meaby & Co etc for timely advice: seckett@meaby.co.uk or call 0207 703 5034.

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