Smith v Pimlico Plumbers
Welcome back, after last week’s religious discrimination update, we have another Case Law Update for you. This week’s case is about a plumber and is one you may have heard about in the news. It is yet another example of the employee/worker/self-employed debate, this follows the Uber decision and the rise of the gig economy.
Section 230 of the Employment Rights Act defines an employee as an individual who has entered into or works under a contract of employment. Similarly, a worker is defined as an individual who has entered into a contract of employment OR any other contract, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer.
In brief, the difference between a self-employed contractor, an employee and a worker are explained in this table.
| Employee | Worker | Self-employed | |
| Hours: | Have set hours | Have no set hours | Set their own hours |
| Obligations: | Have to work their set hours | Neither party is obliged to offer OR accept work | Bid to obtain work against other contractors |
| Remuneration: | Are entitled to the NMW and protected from unlawful deductions | Are entitled to the NMW and protected from unlawful deductions | Set their own pay from the profit they make. May not earn enough to earn NMW |
| Tax: | Employer deducts tax & NI | Can be either PAYE or invoice | Submits an invoice and deducts their own tax and NI |
| Working Time: | Maximum working week and right to rest breaks | Maximum working week and right to rest breaks | Can choose their own hours |
| Holiday: | Are entitled to holiday pay and must notify employer before taking leave | Entitled to holiday and holiday pay | Are not entitled to holiday pay but can take leave as and when they wish |
| Sickness and Maternity: | Are entitled to sick pay and family friendly payments | Do not get sick pay or maternity pay | Do not get sick pay or maternity pay |
| Responsibilities: | Cannot send someone else to do their work. Disciplinary procedures apply to them | Cannot send someone else to do their work. Work for the employer not the client/customer | Can sub-contract work out to someone else. Disciplinary procedures do not apply to them |
| Supervision: | Manager is responsible for setting tasks & workload | Under supervision of a manager | Under no direct supervision |
| Equipment: | Employer provides tools and materials for work | Employer provides tools and materials for work | Provides tools and materials |
| Employment Rights: | Upon reaching two years’ service have unfair dismissal rights and all other types of ET claim | Can bring claims for whistleblowing, discrimination | Very few rights. |
This matrix should establish what employment status a person has, however it is not exhaustive and HMRC have also produced an online questionnaire to help determine the status. The ET will always look at the wording of the contract as a starting point, but it is not determinative. It is how the contract is performed that is the important point.
Therefore, today’s question is:
Can a plumber with a self-employed contractor agreement bring a disability discrimination claim?
Mr Smith, the Claimant, was a plumber with Pimlico Plumbers, the Respondent. The Claimant had a self-employed contractor agreement with the Respondent. Despite the agreement referring to the Claimant as self-employed, there were several terms that muddied the water in regard to his employment status.
This included the requirement to wear a uniform emblazoned with the Respondent’s logo, to drive a GPS tracked vehicle also carrying the Respondent’s logo, a requirement to work at least 40 hours a week, an obligation to be available to take on-call work, an obligation to report all work done through the Respondent, not being allowed to work privately or compete for the Respondent’s business, a disciplinary procedure and an obligation to notify the Respondent of time taken off.
However, the Claimant could also choose when he worked and what jobs he accepted. He was also required to provide his own tools and handle his own tax & NI deductions. He also risked not getting paid if a customer did not pay an invoice or for work done rectifying jobs. Despite it not being in the agreement, plumbers could also switch jobs.
The Claimant believed that he was self-employed. He had his own accountant, was VAT registered and paid a salary to his wife for performing administrative duties. Following a heart attack and period of pro-longed absence, the Claimant’s agreement was terminated by the Respondent.
The Claimant felt this was unfair and initiated unfair dismissal and entitlement to holiday pay and sick pay claims against the Respondent. He also lodged a direct disability claims against the Respondent and its Chief Executive, Charlie Mullins.
The Respondent argued that the Claimant was not an employee and a preliminary hearing held to determine the Claimant’s employment status. The Employment Judge found that the Claimant was not an employee because of the fact he was not obliged to accept work, risked working for free and was VAT registered did not correspond with an Employee. This ruled out the possibility of him bringing unfair dismissal claims.
However, the judge did find that the Claimant was a worker and could therefore, bring discrimination claims. The reasons for this were because, the Respondent was his employer, not his customer, the agreement set a minimum amount of hours to be worked, the Respondent monitored the Claimant’s work and, despite being able to swap jobs, this was akin to switching shifts at a shop and not subcontracting work out to someone else. Therefore, the discrimination claim could proceed.
The Respondent appealed and the EAT dismissed the appeal. It held that the fact the plumbers could not sub-contract work or compete for the Respondent’s work privately meant they were workers and not employees. The Respondent appealed again to the Court of Appeal.
Once again the appeal was rejected. The Court of Appeal Judge held that the Claimant could not subcontract his work, had a minimal number of hours and a large degree of management was exerted by the Respondent. Therefore, the Respondent was the Claimant’s boss, not his client.
The takeaway point:
Yes, in this case despite the contract using terminology to suggest the Claimant was self-employed, the reality of the agreement showed that the Claimant was in fact a worker. In the obiter of the judgment, the Court of Appeal Judge, Sir Terence Etherton, added,
“operatives (of companies using the gig economy model) are intended to appear to clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker.”
This suggests that appearing as an employee/worker, whether it be uniforms, company vehicles or otherwise could result in someone being found to be a worker. Unlike the Uber and Hermes cases, this is a Court of Appeal case, it is binding on future cases on this topic and will have a substantive impact on future gig economy/employment cases – including the Uber appeal!
Ambiguous contracts have also not helped the Tribunal to establish employment status, and, in some cases, have resulted in the employer being criticised by the Judge. Our suggestion is to follow the wise words of Pilmlico Plumbing’s Charlie Mullins, “Like our plumbing, now our contracts are watertight.” However please also ensure that the operation of the contracts is consistent with what is written down. This should result in there being no ambiguity and eliminate the possibility of litigation.
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