Are your contractors actually workers?
In this blog article, Travlaw’s own Ami Naru discusses the much-talked-about “Pimlico Plumbers” employment case which finally came to a conclusion recently, and dealt with the status of a self-employed plumber – was he a “worker”, or not?
Background to the Pimlico Case
Pimlico Plumbers took their case to the Supreme Court after the Employment Tribunal, and Employment Appeal Tribunal, found that one of their self-employed plumbers was actually a ‘worker’, which meant he had some rights, such as rights under the Working Time Regulations and entitlement to the National Minimum Wage.
Gary Smith worked for Pimlico Plumbing Ltd under a contract that described him as an “independent contractor” which, in other words, meant he was self-employed. Under the agreement, Mr Smith chose his own hours, could turn down jobs, and was responsible for his own taxes.
When Mr Smith’s agreement was terminated following a period of ill health, he brought claims for unfair dismissal, wrongful dismissal, holiday pay, unlawful deduction from wages, and disability discrimination to the Employment Tribunal, who found that he was in fact a ‘worker’ rather than a self-employed individual.
In the UK, employment status determines your rights and ability to bring claims to the Employment Tribunal. Employment status is defined by Section 230 of the Employment Rights Act 1996. The difference between a ‘worker’ and an ‘employee’ is defined by the act as follows:
- Someone “who has entered into work under a contract of employment” is an employee
- Someone “who has entered into work under a contract of employment or any other contract whereby the individual undertakes to do or perform personally any work/services for another party” is a worker
One of the main differences between an employee and a worker is that an employee cannot substitute someone else to carry out their work for them, as an employee has to provide personal service.
Whilst the Employment Tribunal found that Mr Smith was not an employee because there was no mutual obligation on Pimlico to provide work for him, or to pay him for the work carried out, they did find that he was a ‘worker’ because he was unable to freely substitute another person to do his work, he had to work a minimum number of hours per week, and Pimlico exercised control over Mr Smith which meant he could not work for other clients.
The finding that Mr Smith was a ‘worker’ was significant as it meant he had some employment rights, i.e. the right to claim holiday pay, unlawful deduction from wages, and disability discrimination.
At the Supreme Court, Pimlico argued that there was no requirement for Mr Smith to perform work personally as he could substitute someone else to do it. The Supreme Court decided that, whilst Mr Smith had this right, there was nothing expressly written into his contract giving him an unfettered right for substitution, as the contract said he could only substitute another Pimlico worker to carry out the work. Pimlico also tried to argue that they were a client or customer Mr Smith but the Supreme Court rejected this, finding that there were elements of his contract which “strongly militated against recognition of Pimlico as a client or customer”. These included the requirement to wear a branded uniform, drive a branded van, carry an identity card, and closely follow the administrative instructions of a control room.
Advice to employers following Pimlico
In light of this decision, employers should ensure that the terms of their agreements when contracting with consultants should be reviewed thoroughly, as the terms of the agreement and what happens in practice will determine employment status.
For more information on this article, or if you have any queries on employment issues, please contact:
Head of Employment
t: 0113 258 0033
This article was originally published on: 25 July 2018