Blog: When is self-employed not self-employed?

You will hopefully have read by now our newsflash on the Supreme Court’s Pimlico Plumbers judgment. I’d like to clear up a couple of myths about that case that have been circulating in the media.

First of all, this it is not a gig economy case. Mr Smith was not engaged via an app or any sort of online platform.

The next myth is that this judgment will have a significant legal impact. I don’t think it will, certainly not in legal terms.  It is so fact-specific that it won’t really create any important legal precedents.

What this case does do, however, is raise the issue of employment status very prominently in the news and signals to employers and workers alike that this is an issue to pay attention to. And it also confirms very clearly, and in the highest UK court, the direction of travel of recent cases on worker status.

If any of you were lucky enough to see me speak at our recent legal update seminars, you will recall that I pointed out that worker status is to be found somewhere on the line between employed and self-employed status.

The main conclusion from cases like Uber, Deliveroo, King v Sash Windows, City Sprint and Pimlico Plumbers is that the bar is now set rather low for contractors being able to persuade Tribunals that they are at the very least ‘workers’, if not full employees.

Employment status cases are very close to my heart. Not long after I qualified as a lawyer I was involved with one of the lead cases on employment status that was decided in the Court of Appeal. The proposition that emerged from that case (which we won) was that personal service is at the heart of the employment relationship. It follows that if there is no requirement to provide your services personally then you cannot be an employee or a worker. In that case we had drafted a very clear and unambiguous substitution clause that allowed the contractor to provide a substitute of their choice at any time for any reason. The choice of substitute and when to use them was entirely that of the contractor. The rest of the arrangements between my client and the contractor pointed to him being at the very least a worker but the substitution clause was the key factor.

Over the years, the case law has moved away from the position under scrutiny that case, but my view remains that if you have a substitution clause in its purest form, and it is not a sham, then there will be a good argument that the contractor is genuinely self-employed.

Tellingly, in all of the ‘worker’ cases mentioned above, there is only a limited right to provide a substitute, a typical example of which (including in the Pimlico Plumbers case) is that the substitutes have to be provided from a pool authorised by the company.

What this boils down to is that if you have been using a contractor for a period of more than a few months you should urgently carry out an audit into the true nature of their status. The labels that you and the contractor have placed on them and their tax treatment are basically irrelevant. What really matters is whether they need to provide their service personally, how much control you exercise over the contractor and whether they are obliged to work when asked.

Why is it so important to get it right? Two words: Sash Windows. That case in the European Court of Justice decided that if someone had been treated as self-employed (and therefore not given paid holiday) but was in fact a worker then they could claim compensation for annual leave back to when they first provided their services. Given that the right to paid holiday was introduced in the UK in the late 1990s, the compensation awarded in such cases is considerable.

If you are concerned you may have some holiday pay time bombs, we strongly suggest that you take advice ASAP. And I’d naturally be delighted to help.

Simon Martin
Partner

Email Simon or call 0117 325 0929