Background
Mr Smith was engaged by Pimlico Plumbers (‘Pimlico’) as a plumber under a contract that stated he was an independent contractor in business on his own account. Pimlico terminated its relationship with Mr Smith after he suffered a heart attack. He brought claims for unfair dismissal, disability discrimination and holiday pay. As a preliminary issue, the original employment tribunal had to consider whether he was an employee, worker or self-employed. It ruled that he was not an employee, so could not claim unfair dismissal. However, it found him to be a worker for the purposes of the Employment Rights Act 1996, the Working Time Regulations 1998 and the Equality Act 2010, so was entitled to proceed with his other claims.
Pimlico unsuccessfully appealed the tribunal’s decision as to Mr Smith’s worker status to the Employment Appeal Tribunal and subsequently to the Court of Appeal. In dismissing Pimlico’s appeal, the Court of Appeal found that on the one hand, Pimlico Plumbers wanted to publically present its plumbers as an integral part of its own workforce, whilst on the other to contractually engage with them as if they were self-employed independent contractors. It also found that its contractual documentation was “carefully choreographed” to seek to achieve these essentially inconsistent objectives. (For further detail on the Court of Appeal’s decision/reasoning, see our previous alert, Pimlico Plumbers’ appeal goes down the drain).
Pimlico sought and was, (somewhat surprisingly), given leave to appeal the Court of Appeal’s decision to the Supreme Court.
Supreme Court’s decision
The Supreme Court focussed on the two main tests that had been considered throughout the litigation, whether Mr Smith was ‘obliged to carry out his services personally’, and whether Pimlico was ‘a client or customer of a business carried on by Mr Smith’.
In order for Mr Smith to qualify as a worker, it was necessary for him to establish that he had undertaken to personally perform work or services for Pimlico, and that Pimlico was not his client or customer.
Personal service
The Supreme Court ruled that the employment judge had been entitled to find that Mr Smith had only a limited right to appoint a substitute to do his work, and this right was restricted to appointing another Pimlico plumber. The Supreme Court found this to be entirely different to a scenario where there is an unfettered right to provide a substitute, (i.e. the ‘employer’ exercises no control over the identity of any substitute, provided that the work gets done satisfactorily). In addition, Pimlico’s contractual terms were clearly directed at an expectation that performance would be by Mr Smith himself. He was expressly required to provide such services as were ‘within his skills’ and to warrant that he was competent to perform the work and was personally required to maintain high standards of conduct and performance. On this basis, the Supreme Court found that the employment judge had been entitled to conclude that the dominant feature of the contract was an obligation of ‘personal service’ and that the limited right of substitution that existed was not inconsistent with such an obligation.
Client or customer
Although the Supreme Court acknowledged that Mr Smith was free to reject a particular offer of work, or accept other work, and bore some of the financial risks of the work, it also noted that,
“…there were features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. Its tight control over him was reflected in its requirements that he should wear the branded Pimlico uniform; drive its branded van, to which Pimlico applied a tracker; carry its identity card; and closely follow the administrative instructions of its control room. The severe terms as to when and how much it was obliged to pay him, on which it relied, betrayed a grip on his economy inconsistent with his being a truly independent contractor.”
It was primarily on the basis of the above two findings that the Supreme Court dismissed Pimlico’s appeal, with the result that Mr Smith’s substantive claims for holiday pay and discrimination will now return to the employment tribunal to be decided on merit. In addition, the Supreme Court had also opened the door for other Pimlico staff to bring claims for unpaid holiday, and other ‘worker rights’ that might have been infringed.
Commentary
Pimlico Plumbers v Smith has attracted a lot of media attention having been held out as having significant negative implications for the UK’s ever growing ‘gig economy’ (despite the fact that Pimlico itself does not in fact operate in that sector). Pimlico’s ever flamboyant CEO and founder, Charlie Mullins, went so far as to assert that his ‘defeat’ would inevitably lead to a ‘tsunami of claims’ in the sector. However, media hype aside, from an employment law perspective, there is nothing ground-breaking (or even surprising) about the Supreme Court’s decision. It adds nothing new in terms of the legal tests for determining employment status, nor does it provide any particularly helpful clarity as to their application. For the time being such employment status disputes will continue to turn on their specific facts, and an unsatisfactory level of uncertainty therefore remains.
Any ‘employer’ who engages contractors on a self-employed basis, where those contractors have been working regularly or exclusively for them over a long period, may well already be running the risk of such individuals ‘acquiring’ worker status, (irrespective of the Supreme Court’s latest decision in Pimlico). Such companies should already be undertaking regular reviews of their contractor relationships, in order to assess any potential exposure to claims for sick pay, maternity/paternity pay or the national minimum wage etc.
Taylor Review
One of the 2017 Taylor Review recommendations was that when seeking to determine whether someone is a worker or an independent contractor, there should be greater emphasis on whether the ‘employer’ exercises high levels of control, and less focus on whether there is an obligation of personal service, (a key focus in the Pimlico decision). With this in mind, it will be interesting to see the detail of the Government’s response to its further post Taylor consultations as to how to achieve greater clarity in the currently complex and confusing arena of employment status. (See, Good Work? Government publishes it response to the Taylor Review) for further detail. These additional consultations closed on 1 June, and as yet there is no date set for publication of a response.
How can EEF help?
As always, EEF will continue to keep you updated on relevant HR and employment law developments. Dates for our popular Autumn Member Briefing: Employment Law Update are now available. You can reserve your free place here.