The withdrawal by a transferee of a contractual entitlement to a travel allowance was not void...
Pimlico plumber was a 'worker'
Pimlico Plumbers Ltd v Smith
The Supreme Court has handed down its decision in the Pimlico Plumbers case which focussed specifically on the question of whether a plumber stated to be self-employed in his contract was in fact a worker. It unanimously upheld the decision of all the courts below that Mr Smith was indeed a worker.
Both the Employment Appeal Tribunal and Court of Appeal had confirmed, on the facts of this case, that a plumber engaged by a London firm, Pimlico Plumbers and described as ‘self-employed’ in his contract, was in fact a ‘worker’. This appeared a very harsh decision as Pimlico had actually offered those working for them the opportunity of being employees or being independent contractors – they were therefore not shying away from giving their staff rights.
Mr Smith had worked as a plumber for Pimlico for six years. He had to wear Pimlico uniform, drive vans with the Pimlico logo and could only be contacted by customers through Pimlico. Contracts and estimates were issued in the name of Pimlico and payment was made to Pimlico. The movements of the plumbers were monitored via a GPS system on their vans. When he parted company with Pimlico Mr Smith claimed that he’d been unfairly dismissed and discriminated against and that he was owed holiday pay.
At a preliminary hearing a tribunal held that Mr Smith was not an employee but a ‘worker’ and entitled to holiday pay and protection against discrimination. The EAT upheld those decisions in 2015.
Pimlico appealed the finding that Mr Smith was a worker. The Court of Appeal looked at whether Mr Smith had an obligation to provide work personally and if so, was he working for himself and providing services to Pimlico as a client or customer or was he providing those services on behalf of Pimlico? There was nothing in the agreement that expressly allowed Mr Smith to substitute another plumber if he was busy elsewhere. The contract could not be interpreted, as Pimlico argued, to mean that he could have hired someone else to do the job. Although he was, on the face of it, entitled to provide his services to others he never did so, and the Court of Appeal found that he would have had difficulty in contacting any customers outside the hours when he worked for Pimlico and would not have been able to use his van.
Neither was Pimlico’s argument that it was the client or customer of Mr Smith upheld. The following factors were crucial: the high degree of control exercised by Pimlico over Mr Smith; the stringent restrictive covenants in the contracts which sought to prevent him working for any other plumber in the Greater London area for three months post-termination; and the tribunal’s finding that Mr Smith was contractually obliged to work at least 40 hours per week.
Taken as a whole, the Court of Appeal could find no fault with the tribunal’s finding that Mr Smith was a worker - he was an integral part of Pimlico’s business, providing services on behalf of Pimlico rather than to them as a client or customer.
Since the Court of Appeal’s decision
Since the Court of Appeal’s decision, the Taylor Review was published in July 2017. In it Matthew Taylor recommended keeping the three-tier structure of employee, worker and independent contractor but renaming a worker a ‘dependent contractor’ and ‘replacing the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail.’
The government’s response, published in February 2018, agreed that ‘it should be easier for individuals and businesses to determine whether someone is an employee, a worker, or self-employed, and is committed to improving clarity and certainty in this area’. It agreed to consult on ‘the best way to improve clarity for those on the boundary between employment and self-employment, including options for legislative reform. This will help ensure that fewer ‘workers’ find ‘themselves fighting for protections that they should already have. It should be clear to a person whether he or she is employed’.
Supreme Court decision
When examining the contract, the Supreme Court said that the key test is personal performance and as this was also a test for employees, it is important to set out what is meant. There was no right to substitution set out in the contract although it was accepted from evidence that Mr Smith could essentially swap shifts with other Pimlico plumbers and he could bring in assistance or someone with a particular specialism. However, this was not a right of substitution. The Supreme Court said that the right of substitution was ‘so insignificant as not to be worthy of recognition in the terms deployed’ which was judicial code for ‘if it is so important put it in the contract’.
Mr Smith was obliged to accept work which was within his skills and competency and Pimlico decided everything down to his cleanliness when performing that work. Pimlico’s contention that the requirements were capable also of applying to anyone who substitutes for him ‘stretches their natural meaning beyond breaking-point’ which is judicial code for ‘you are having a laugh’. The Supreme Court had no hesitation in finding that Mr Smith was obliged to do the work personally.
In relation to the argument that Pimlico Plumbers was a client or customer of Mr Smith, the key question was whether he could market his services independently or whether he was an integral part of Pimlico Plumbers, acting as their subordinate and under their direction. He wore their uniform, drove their branded truck and used their paperwork. The Supreme Court agreed with the tribunal that Pimlico was not a client or customer of Mr Smith.
It was clear from Mr Smith’s contract, said the Supreme Court, that there were elements of tight operational and financial control; there were fierce conditions on when and how much he would be paid and also restrictions on him competing with Pimlico once he left. Even the contract and handbook used words such as ‘wages’, ‘gross misconduct’ and ‘dismissal’ and provided for strict post-termination restrictions, which the Supreme Court considered ‘ill-considered lapses’ (judicial code for incompetent). It was therefore clear that Pimlico was not a client or customer.
Link to judgment: http://www.bailii.org/uk/cases/UKSC/2018/29.html
Although this is not a 'gig economy' case as such, as Mr Smith had worked full time for Pimlico for many years, it is a useful reminder that all such cases will be considered based on their specific facts. When assessing those facts the tribunal will look first of all at the paperwork - and sloppy drafting and cut and pasting of documents will often be inconsistent with the arguments being run many years later.
Pimlico even tried to put right the initial inadequacies in the paperwork by presenting a later version of the contract which the Supreme Court said was equally as confusing and of no relevance to Mr Smith as it post dated him. Whilst it is tempting to cut corners and not seek professional advice on documents, this case highlights why it is important to do so. This case could have been a lot worse for Pimlico as the tribunal could have found that Mr Smith was an employee.
There has been a lot of press comment which is very confusing, including a statement from the Equality & Human Rights Commission, who funded Mr Smith's claim, suggesting that if you wear a uniform and drive a branded truck you are 'employed' and entitled to holiday and sick pay. The finding was that Mr Smith was a worker and workers are not entitled to sick pay.
The fact that the Supreme Court even allowed the appeal in what was, essentially, a case decided on its own facts, gave a hint that they felt clarity was needed in this area of the law, and it’s clear that the Supreme Court thought this was a missed opportunity.
As it pointed out, the intermediate category of ‘worker’ which sits between an employee and a self-employed contractor has been around since 1875. However, what has been unhelpful is the use in legislation of the same words which have different meanings.
For instance, ‘employee’ under the Employment Rights Act 1996 (ERA) is a person working under a contract of employment, but in the Equality Act 2010 ‘employee’ is widened to include those who personally perform work or services. To complicate matters, ERA, s. 230 defines a worker as someone working under a contract for service (an employment contract) or someone who personally performs work or services other than when the status of the other party is one of client or customer.
It is clear that the Supreme Court would have liked the opportunity of examining this more carefully, especially as Mr Smith is also bringing a claim of disability discrimination, but the appeal was not put on that basis.