In the latest gig economy case focussing on worker status, a plumber has been found to be a 'worker' by the Court of Appeal despite being self-employed for tax purposes (Pimlico Plumbers Ltd and Anor v Smith).
This is one of the first gig economy cases to affect a skilled trade such as plumbing, so could signify that more cases will arise across multiple of industries.
What should organisations be doing to reduce the risk of legal disputes?
Gary Smith was a plumber who carried out work for Pimlico Plumbers (PP). He suffered a heart attack in 2010 and requested to reduce his working days from five to three per week. This request was refused by PP, and his contract was terminated.
Mr Smith brought a claim to the employment tribunal. He claimed, amongst other things, unfair and wrongful dismissal, direct disability discrimination and failure to make reasonable adjustments.
The question for the tribunal was whether Mr Smith could bring any of these claims. In order to bring claims for unfair or wrongful dismissal, Mr Smith would need to be an employee. In order to bring claims for direct disability discrimination or failure to make reasonable adjustments, he would need to be either an employee or a worker.
The tribunal held that Mr Smith was not an employee. One of the deciding factors in this respect was that there was no obligation for PP to provide work to Mr Smith, and therefore there was no mutuality of obligation.
However, the tribunal found that Mr Smith was in fact a worker. PP appealed this decision to the EAT, and argued that Mr Smith was not a worker but a self-employed contractor. However the EAT agreed with the tribunal, and so PP further appealed to the Court of Appeal.
The Court of Appeal considered whether Mr Smith should properly be categorised as a worker or as a self-employed contractor.
The contract between Mr Smith and PP suggested that he was a self-employed contractor and described him as a "self-employed operative".
The contract also set out that:
Despite this, the Court of Appeal held that Mr Smith was a worker, and not a self-employed contractor. The Court of Appeal considered a number of factors in this respect, including the following:
Mr Smith had no express right to substitute his work to an external plumber. This was the case even though in practice plumbers swapped jobs around between each other, used each other to provide additional help where more than one person was required for a job or to do a job more quickly, and external contractors were sometimes required to assist a job where there was a need for further assistance or specialist work.
The right to substitute is one of the hallmarks of self-employment, and the lack of an express right to substitute an entire job to an external plumber pointed towards Mr Smith being a worker.
Mr Smith did exercise discretion in some respects. For example, he could decide when he wanted to go home after a working day, and, in relation to any particular job, he could decide what work was needed, when to do it and whether to negotiate on price.
However, PP exercised very tight control over Mr Smith in most other respects, suggesting that he was a worker. Indeed, PP required him to:
Additionally, Mr Smith was subject to onerous restrictive covenants including a non-compete for three months post termination.
Whilst Mr Smith could technically undertake private work, his ability to do work for others was limited. This was because Mr Smith was still obliged to do a minimum number of hours per week with PP, and was required to agree the hours he would work with PP in advance.
When agreeing hours with PP, Mr Smith was free to refuse any particular work assignment or any particular date, but he could not refuse all assignments. He also had to be available during his shift to take on call work. The lack of real ability to work for others pointed toward worker status.
Whilst the contractual documentation suggested that he should submit invoices, which would be in keeping with being self-employed, in reality, wages were paid directly to Mr Smith, and he was provided with wage slips. Again, this suggested that he was a worker.
To date, the gig economy cases have been limited to taxi and courier firms, and generally to relatively short term and unskilled jobs.
This case shows that the heightened awareness of worker status is leading to a flurry of claims in other areas of the economy and in other industries.
Given the significant momentum behind these types of claims the government has commissioned a review into modern working practices and HMRC had established a new unit to investigate companies’ use of freelance and self-employed individuals.
Organisations which rely on similar business models should be alert to this ever expanding line of case law and the potential for litigation of their own, especially the resulting PR and financial impact.
Employers who wish to use a freelance workforce and reduce the risk of their workforce being found to be 'workers' should consider the following:
If you are concerned about worker status within your organisation, or you would like further advice in this respect, please contact a member of the employment team who would be very happy to assist.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.