A recent employment law case is seen by many as the most significant step yet in bringing the rights of ‘casual workers’ in-line with those enjoyed by full-time employees. Martha McKinley, an employment law expert from the national law firm, Stephensons, explains the decision.
Last week’s decision from the Court of Appeal in the case of Pimlico Plumbers is being welcomed by some as further validation of the recent case law on the contentious issue of ‘employment status’. As the Master of the Rolls identified at the outset of the judgment, this decision puts a spotlight on business models in which operatives would appear to be working for the business as a full-time, fully contracted employee, but are in fact classed by the organisation as self-employed individuals.
Working practices 'under scrutiny'
The rise of the so-called ‘gig economy’ in areas like delivery services or private hire companies - characterised by short-term contracts and freelance work, rather than permanent employment - has brought greater scrutiny upon other industries that have operated in a similar way for decades. Namely, companies in the trades; particularly building and plumbing.
Gig economy employers argue that such an arrangement allows greater flexibility, both for the business – which only pays when work is available – and the operatives, who have control over when they work and for how long. Critics say that the model is exploitative in nature, providing no protection against unfair dismissal, no right to redundancy payments, holiday pay, sick pay or even the minimum wage.
Such were the arguments at play in the case of Pimlico Plumbers vs Garry Smith.
Employee, contractor or worker?
On the first occasion this case came before an employment tribunal the judge concluded that Mr Smith - a plumber whose contractual relationship with Pimlico Plumbers extended from 2005 to 2011 - was not an employee and therefore could not pursue a claim for unfair dismissal, among a number of other claims. However she did concede that he met the intermediate status of ‘worker’ as opposed to a self-employed contractor. This was in spite of the wording of an agreement between the parties, which listed Mr Smith as self-employed.
In short, the initial decision cleared the way for Mr Smith to pursue claims for unpaid annual leave, unlawful deduction of wages and disability discrimination.
While Mr Smith was VAT registered, invoiced for his work, employed an accountant and was required to hold professional indemnity insurance, these factors were not sufficient for the day-to-day reality of the working relationship to be ignored. The Judge concluded that Mr Smith was under an obligation to provide work for a minimum number of hours, or on the days specified by Pimlico Plumbing. He was an integral part of the company’s operations, and was subject to tight control including restrictions on his ability to work for other employers or to source work for himself. One of the key deciding factors was the fact that Mr Smith was subject to the company’s procedures and working practice manual.
The decision was appealed to the employment appeal tribunal by Pimlico Plumbers, however it was rejected, resulting in a further appeal to the Court of Appeal. Once again the finding that Mr Smith was not genuinely self-employed on his own account was upheld. The judgment confirmed that the day-to-day operations he was expected to fulfil did not reflect that Pimlico Plumbers was a client or customer of Mr Smith. Instead, the judge concluded that the company expected him to be subordinate to the company and the facts reflected that this was the case.
Setting a precedent?
While some campaigners have hailed this latest decision as a watershed moment, anyone looking to this particular case as an indication of how such matters will be handled by the courts in future should exercise caution. Indeed, Lord Justice Underhill made clear that the legal issues arising from ‘gig economy’ arrangements are still, very much, ‘live’. As such, HR professionals and lawyers alike should stop short of drawing any generalised conclusions from this Pimlico Plumbing vs Smith, as future tribunals will ‘look narrowly at the (…) documentation which does not appear to correspond to the reality of the relationship’, in each particular case.
Equally, any employer looking to adopt a ‘check-box’ exercise to avoid litigation themselves should be aware that a court will take any case on its own merits, not necessarily in light of previous judgements.
Nonetheless, the case should be considered carefully by businesses who seek to engage individuals on the basis that they are ‘self employed’, despite placing restrictions on them regarding working in competition, performing work personally and working a set number of hours. This is unlikely to be the last in the series of cases involving the so-called ‘gig economy’, and companies would be well advised to take stock of - and review - existing working relationships.