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Supreme Court upholds decision of Court of Appeal in Pimlico Plumbers v Smith

In Pimlico Plumbers v Smith, the Supreme Court was asked to consider an appeal by Pimlico Plumbers regarding the ability of its plumber operatives to claim 'worker' status despite being termed as 'self-employed operatives' in their contracts. The Supreme Court unanimously dismissed the appeal, finding that Mr Smith qualified as a worker under the relevant provisions of the Employment Rights Act 1996 and was therefore entitled to rights such as holiday pay and protection against unlawful deductions from wages and discrimination.  

Background

For many years, an intermediate category of working people have been identified falling between those who work as employees under a contract of service and those who worked for others as independent contractors.  It is recognised that there are some self-employed persons whose services are so integrated into the business of others that they should have certain protection against exploitation and discrimination.

Under the Employment Rights Act 1996, a 'worker' is defined as being an individual who has entered into or works under a contract of employment, or any other contract, express or implied, under which the individual undertakes to do or perform any works or services for another party to the contract whose status is not by virtue of the contract that of a customer of any profession or business undertaking carried out by the individual (Section 230(3), Employment Rights Act 1996).

2017's landmark gig economy case of Uber BV and others v Aslam and others found that drivers working for Uber, engaged in their contracts on a 'self-employed' basis, were workers for the purposes of the Employment Rights Act 1996; such status guaranteed Uber's drivers national minimum wage and other working time rights.

The Case

Mr Smith, a plumber, carried out plumbing work for Pimlico Plumbers between August 2005 and April 2011, and was provided with a company uniform, company identity card, mobile telephone and a rented van by Pimlico Plumbers. Throughout this period, Mr Smith had worked solely for Pimlico Plumbers, retaining control over which jobs to take and the length of his working hours, as well as exercising discretion over how much work was required for a customer and whether or not to negotiate price with a customer. Following a heart attack in 2011, Mr Smith submitted a claim to the Employment Tribunal claiming that he had been  unfairly dismissed by Pimlico Plumbers following attempts to reduce his working hours as a consequence of the heart attack.

The Tribunal found that, whilst he was not an 'employee', during the period that he worked for Pimlico Plumbers, he was a 'worker' within the meaning of the Employment Rights Act.  Pimlico Plumbers appealed this decision to the Employment Appeal Tribunal and then to the Court of Appeal, both of which dismissed the appeal and reasserted that Mr Smith was a 'worker' - the Court of Appeal found that the level of integration into Pimlico Plumbers' business, the control exercised by Pimlico Plumbers over Mr Smith, and the restrictive covenants Mr Smith was subject to, such as a three-month non-compete restriction, were inconsistent with being truly 'self-employed'.

The Supreme Court unanimously upheld the decision of the Court of Appeal, agreeing that the Employment Tribunal was entitled to find that the dominant feature of Mr Smith's contract with Pimlico Plumbers was an obligation of personal performance; such an obligation stems from the contract's terms specifically being directed to performance by Mr Smith personally, and from the  stipulation that any substitute must be another Pimlico operative. It also agreed that the Tribunal had been entitled "by a reasonable margin" to conclude that Pimlico could not be regarded as a client or customer of Mr Smith, citing factors such as the tight control over him, reflected in Pimlico's requirements that Mr Smith "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".   

Comment

This is not an unexpected decision - the question of whether someone is a worker or an employee is basically a question of fact for the Tribunal to decide and the Supreme Court has simply upheld the decision on the basis that the Tribunal was entitled to find the facts as it did.

Because of its findings, there was no need for the Supreme Court to consider some of the interesting arguments put forward by Mr Smith's legal team about personal service, mutuality of obligations and the difference between being a worker and being covered by the Equality Act.  However, it is good to see Lord Wilson taking the opportunity to clarify that just because a worker has a contractual entitlement to send a substitute, that does not mean that he or she is free of any obligation to perform work personally. It will usually be enough if the clear expectation of the parties is that the work will usually be done by the worker himself. This pragmatic ruling reflects one of the key recommendations of the Taylor Review.

Beyond that, this case demonstrates a fairly unremarkable conclusion regarding employment status and the dominant purpose of an employment contract. The case will add further weight in future to any tribunal consideration of obligations of personal performance and rights of substitution, but little more besides.

Having said that, the decision is likely to cause concern for "gig economy" employers, and we anticipate a lot of interest from the unions looking for recognition in new areas.

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