Employment Bulletin

mortlock charlotteIn what is expected to be the most significant decision to date on worker status, the Supreme Court has confirmed that a plumber, described in his contract as an independent contractor, was in fact a worker entitled to a host of legal rights. Charlotte Mortlock, senior associate and Jordan Daruvalla, trainee solicitor discuss the decision and its potential impact on the future of worker status and rights.

In Pimlico Plumbers Ltd and anor v Smith, the Supreme Court (SC), acting as the highest legal authority in the UK, has upheld a lower Tribunal's decision that a plumber working for Pimlico Plumbers (PP) was a 'worker' in accordance with both the Employment Rights Act 1996 (ERA) and the Working Time Regulations 1998 (WTR), and also 'in employment' for the purposes of the Equality Act 2010. This ground-breaking decision, whilst not involving an individual in the 'gig-economy', may have far-reaching ramifications for the issue of worker status and in particular for 'gig-economy workers' who are not traditionally employed in full time work, as they may now be entitled to legal rights such as holiday pay and sick pay. However, as claims in this area are inevitably fact specific and parliament are currently consulting on the issue following the Taylor Review, the practical impact of this decision may have been overstated.

The Background

This case concerned a plumber, Mr Smith, who brought claims for a failure to pay holiday pay, unlawful deductions from wages and disability discrimination, after his employment was terminated. At first instance, the Employment Tribunal judge found that, as Mr Smith was obliged to provide work personally to PP and did not therefore have an unfettered right of substitution, he satisfied the definition of 'worker' contained in the ERA. As a result, he gained the rights associated with worker status, notwithstanding that his official contractual status remained that of an independent contractor. After multiple appeals, the case finally reached the SC, with PP maintaining that, as their plumbers had the right to swap shifts with each other, they had not undertaken to personally perform the work. PP also insisted that their plumbers were either their clients or customers, and could therefore not be workers for the purposes of the ERA.

The Decision

On 13 June 2018, the SC affirmed the decisions made by the lower Tribunals; that Mr Smith's ability to swap shifts was a limited and non-contractual concession rather than an unfettered right of substitution. As a result, the judge was entitled to conclude that this was consistent with an obligation to perform services personally, and the plumber could therefore be legitimately considered as a worker. The SC also disagreed with PP's argument that Mr Smith was their client/customer, as the elements of control PP exercised over him suggested otherwise.

The Reasoning

Although the judgment adds little substance to previous decisions, in concluding that the “dominant feature of [the contractual relationship] was an obligation of personal performance”, the SC helpfully explained the factors they took into account. These included:

  • there being no written term in the contract providing a right to substitute work;
  • the ability to substitute work, in reality, being limited only to another PP operative (making it an informal concession rather than a right); and
  • the requirements imposed by PP being directed at plumbers personally (eg. 'Your skills').

Unsurprisingly, in finding that PP exercised a degree of control over Mr Smith sufficient to contradict the assertion that he was their client/customer; the SC took a practical approach which focused on the reality of the working relationship. Factors which were important to this finding included:

  • PP requiring Mr Smith to use a branded uniform and vehicle;
  • heavy control over Mr Smith's terms of payment; and
  • contractual references to 'wages', 'employment' and 'gross misconduct'.

Taken together, these factors indicated a relationship of subordination and therefore warranted the finding of worker status and the awarding of further rights. This involved a similar line of argument to that taken in Addison Lee - a link to our previous article on this can be found here.

The Future

Given that all UK courts are legally bound to follow SC decisions, this case provides useful guidance on the issue of worker status, although it is notable that it does not provide any new guiding principles and instead re-emphasises what was already known. However, as contractual documentation will differ, as will the reality of each situation, the issue of worker status will still need to be considered on a case by case basis.

Although not strictly a gig economy case, the high level nature of this decision on worker status may also make it a powerful precedent for individuals continuing to fight for access to employment rights, such as in the Uber and Deliveroo cases (for more information on these cases please see our previous bulletins). Mr Mullins, chief executive of PP, also suggested that this may open the floodgates for other 'self-employed' contractors to challenge their legal status, as reported by the BBC.

Despite this, and to the relief of businesses operating in the gig economy, it is likely that the practical impact of this decision has been overstated. Although the decision by no means lacks authority, it is still open to parliament to overrule and this area is currently subject to government consultations following the Taylor Review. Legislation and policy changes could therefore be on the horizon. For more information on this, please see our previous article. As a result, uncertainty for businesses operating in the gig economy is likely to persist until parliament clearly responds to the growing unrest.

For further information please contact Charlotte Mortlock, senior associate or your usual contact in the Foot Anstey Employment Team.