Last year we blogged about the Pimlico Plumbers case on employment status. The Supreme Court decision is now out: a plumber engaged as an ‘independent contractor’ was in fact a ‘worker’, meaning he was entitled to holiday pay.
Employees, workers and the self-employed – why does it matter?
The key reason for disputes about employment and worker status is that UK employment law provides different levels of protection for employees, workers and self-employed contractors.
- Workers don’t benefit from the full range of rights available to employees (in particular, the right not to be unfairly dismissed).
- Workers have more employment rights than self-employed contractors – including the right to receive the minimum wage and paid holidays.
Depending on the circumstances this means that there can be real value for individuals in being able to establish employment or worker status.
Employment status is always very fact specific, requiring a careful analysis of the contract and, more importantly, of how the relationship actually operates in practice.
Supreme Court decision on worker status
The Supreme Court agreed with the earlier decisions that, on the facts of the case, Mr Smith was a worker. The two key questions were:
- Was there an obligation on Mr Smith to personally perform the work? A right to substitute with a person of the individual’s choice is likely to be fatal to worker status. A right to substitute subject to the employer’s approval or other conditions may not be.
- Was Pimlico Plumbers a client or customer of Mr Smith? If it was, he would not be a worker for employment rights purposes.
The Supreme Court assessed whether the ‘dominant feature of the contract’ was an obligation to perform the work personally. It noted that although there was a limited right of substitution, this was not written into the terms of the contract and only amounted to an informal concession about swapping shifts amongst Pimlico plumbers. Mr Smith was not free to send a substitute of his choice. On the facts, there was found to be an obligation on Mr Smith to perform the services personally.
The Court was also clear that there was no client or customer relationship. The elements supporting a client / customer relationship were outweighed by those opposing it.
Factors supporting a client/customer relationship
- Ability to reject particular jobs and take outside work
- Lack of supervision
- Some financial risk if the client did not pay / for remedying deficient work
Factors opposing a client/customer relationship
- Company uniform, van and ID card
- Requirement to comply with administrative duties
- Company control over payment terms
- Subject to post-termination restrictive covenants
- Contractual terms referred to ‘wages’, ‘gross misconduct’ and ‘dismissal’
What happens next?
The Supreme Court’s decision did not add anything significant to the test for establishing a worker. What it did do was highlight once again the difficulties employers face when determining employment status – whether distinguishing between an employee and a worker; or (as was the case here) between a worker and an independent self-employed contractor.
Although the issue may now be settled for Mr Smith, this is not the last word on employment status and gig economy workers. The Court of Appeal is due to hear an appeal in the Uber employment status case in October 2018, while we may also see some legislative change. Alongside its response to the Taylor review of modern working practices, the government launched a Consultation on Employment Status. Amongst other things, the consultation asked for responses on:
- Keeping the current three-tier approach to employment status in employment rights (employee, worker and self-employed) but renaming ‘workers’ as ‘dependent contractors’.
- How to achieve greater clarity on employment status. One option is to codify the current employment status principles – personal service, control and mutuality of obligation – in legislation. Alternatively, the test could be based on more objective criteria such as length of engagement; percentage of income coming from one employer; and where the work is done.
- Whether to introduce an online tool to help determine employment status (this could be in addition to or instead of legislative change).
The consultation ended on 1 June 2018 and we will keep you updated. It seems unlikely that there will be any new legislation before 2020.
Please get in touch with your usual Brodies contact should you wish to discuss anything raised in this blog. Workbox subscribers can access a section on Employment Status which looks in detail at the tests for and differences between employees, workers and the self-employed.
On June 25, 2018