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On 10 February 2017, in the case of Pimlico Plumbers Limited & Mullins V Smith, the Court of Appeal (CA) upheld the Employment Appeal Tribunal (EAT) in finding that the individuals working as plumbers were “workers” and not “self-employed” contractors.

These operatives appeared to the public as an integral part of the company’s workforce; wearing specified uniforms, driving branded vans, and were subject to GPS tracking by the company’s office staff. Yet the operatives were engaged under terms of agreement which defined them as self-employed contractors.

Background to the decision

Five million people in the UK now work in the “gig” industry. Gig workers are instructed on a self-employed basis giving them greater flexibility and earning potential than employees and workers. However, they do not have the protection of employment law such as protection against unfair dismissal. Many agreements require gig workers to wear a uniform and follow certain procedures and therefore the line between employee, worker and self-employed contractor is more and more blurred.

Employment status is determined not only on the written terms of employment agreed by the parties at the outset of the arrangement, but also what goes on in practice.

A tribunal will look at three tests:

  • Whether there is a requirement for personal service or right of substitution
  • The level of control the company has over the individual
  • Provisions consistent with a Contract of Service

In the much publicised decision in Aslam & others v Uber (2202550/2015) the Employment Tribunal set aside written contracts and found that the taxi drivers were workers, entitled to the legal protections available for those who operate in the gap between self-employment and employee status.

The Uber case followed the principles set out in Autoclenz v Belcher [2011] UKSC 41, in which the Supreme Court rejected the idea that a sham contract only exists where both parties intended something other than what was written. Instead Tribunals should look for the “actual legal obligations of the parties”, using a purposive approach which considers all the circumstances of the case and takes into account in particular the relative bargaining power of the employer and worker. The written contract is only part of the picture.

It was found in the Uber case, during the periods when they were logged on and ready to work, the drivers were workers within s.230(3)(b) of the Employment Rights Act 1996, and by extension the National Minimum Wage Act 1998 and the Working Time Regulations 1998.

What this case managed to do is deal with the reality of “gig work”, where workers do usually have some flexibility in deciding on their working patterns and frequency. Rather than allow that lack of overarching mutual obligation to defeat any claim to the protection of employment law, the Tribunal in Uber decided that although there was no “umbrella” contract, the individuals were workers during the periods when they were logged on and either working or on standby.

The Uber case is not binding authority. Uber have already lodged an appeal to the EAT and will be studying the Court of Appeal decision in Pimlico Plumbers carefully.

Pimlico Plumbers Limited & Charlie Mullins v Gary Smith – The Appeal

In Pimlico Plumbers the EAT concluded that Mr Smith was a “worker” not a “self-employed contractor”. The key issue was whether there was an obligation to provide work personally despite the business’ assertion that the plumbers could send substitutes to work in their place. The judge found that there was no real right to substitute; the company was willing at most to tolerate a form of job-sharing or shift-swapping amongst its existing plumbers that was not enough to negate worker status.

Rejecting Pimlico’s appeal the CA held that there was no error of law in the ET’s conclusion that Mr Smith was a worker.

On the question of substitution he agreed on the facts that Mr Smith had no unfettered right to send another person in his place, and that his was therefore giving personal service a workers. He found that such a right “was not so obvious that it went without saying” and it was not necessary to imply such a right into the contract to give it commercial or practical coherence.

The CA set out a five point guide on the subject of substitution. This comes down to two points:

  • A person is not giving personal service if he has an unfettered right to substitute, or if the right of substitution is limited only by the need to show that the substitute is as qualified as the contractor to do the work, whether or not that entails a particular procedure
  • A person may be giving personal service if he has a conditional right to substitute, depending on the contractual arrangement and in particular the extent to which the right of substitution is limited or occasional. For example, it is consistent with personal service for a right of substitution to exist only when the contractor is unable to carry out the work, or where the right can be exercised only with the consent of another person who has an absolute and unqualified discretion

The decision, as well as the prior Uber decision, highlights the difficulties businesses face when wanting self-employed contractors to appear part of the business in the eyes of a client, yet ensuring they do not obtain any employment rights by being classed as anything other. This case emphasises the importance of understanding that a contract does not always define the status of an individual within a work force or guarantee that an individual’s role could not be perceived as something else.

If individuals are found to be workers and they have not been afforded all their employment rights they are able to make claims for backdated entitlements. We recommend that businesses who employ staff on a self-contractor basis have their working arrangements reviewed on a regular basis to ensure that they do not fall into the same difficulties as Pimlico Plumbers and Uber.

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For further information contact Employment associate, Tom Evans, on 0151 230 1217 or tom.evans@dtmlegal.com.

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