Case update (1): Employment status

self employed plumber

2. “Self-employed” plumber

Summary: Can a plumber, who is self employed for tax purposes, be categorised as a ‘worker’?

Yes, says the Court of Appeal in Pimlico Plumbers & Charlie Mullins v Gary Smith available here.

Facts:  The worker, Mr Smith, worked as a plumber for Pimlico Plumbers Limited (Pimlico) for around six years. He was labelled as a “self-employed operative” and described in documentation as an independent contractor, in business on his own account. However, under the arrangements between Pimlico and Mr Smith, he:

  • was required to wear a uniform and to drive a van, both with Pimlico’s logo;
  • had his movements monitored by Pimlico via GPS installed in the van;
  • could only be contacted by customers through Pimlico;
  • had a contract which:
    • did not permit him to provide a substitute to do his work and largely pointed to personal performance. Instead, Pimlico did permit work to be transferred between operatives and where necessary allowed external specialists to be used; and
    • contained post-termination restrictive covenants.

Also, customer contracts and estimates were issued in the name of Pimlico.

However, Mr Smith:

  • was paid by Pimlico against receipt of an invoice;
  • was required to provide his own tools, equipment and materials;
  • took personal liability for work performed by him and provided his own professional indemnity insurance;
  • was taxed as self-employed and was VAT registered;
  • had no obligation to accept work from Pimlico (but he was required to notify the days on which he was unavailable); and
  • could ostensibly reject particular jobs and could decide his own working hours (but was required to do a minimum number of hours work each week).

Mr Smith brought a Tribunal claim against Pimlico on the basis that he was an employee and had been unfairly dismissed by Pimlico and discriminated against on grounds of disability by failure to make reasonable adjustments.  He also made allegations in respect of unpaid holiday pay and unauthorised deductions from wages.

The Tribunal considered the question of Mr Smith’s employment status as a preliminary issue.  The Tribunal held that Mr Smith was not an employee and so did not qualify for protection against unfair dismissal. However he was found to be a ‘worker’ and entitled to holiday pay and protection against discrimination.

Pimlico appealed to the Employment Appeal Tribunal, which rejected the appeal and upheld the Tribunal’s decision.  Pimlico appealed to the Court of Appeal which also rejected the appeal and upheld the decision that Mr Smith was a worker.

Key factors which led to the Court of Appeal’s decision were:

  • The obligations on Mr Smith to:
    • perform work personally and the absence of a contractual right of substitution; and
    • work a minimum number of hours per week, despite the documentation purporting to allow him to reject work and decide his own working hours.
  • The degree of control exercised over Mr Smith by Pimlico which showed that they were not a customer of a business run by him. Rather, Mr Smith was an integral part of Pimlico’s business and was subordinate to it. The contractual restrictive covenants were important to this finding.  They were onerous and precluded Mr Smith from working as a plumber in any part of Greater London for three months after the termination of the agreement.

Implications:  Whether a self-employed contractor can be classified as a worker depends on the facts of each particular case and the Court of Appeal does not establish new law in its decision.  However, the Court does provide a timely and helpful reminder that even self-employed contractors can have workplace rights and there are some useful pointers to be taken from the outcome of this case:

  • it is crucial for businesses to be aware that a classification of self-employed for tax purposes does not automatically mean that the same classification will apply for employment rights purposes;
  • for self-employed status to hold true, removing a requirement for personal service and allowing a right of substitution is important; and
  • the use of standard contractual documentation should be approached with caution as there is a risk that it will not reflect the reality of the arrangements between the parties and suggest a different type of “employment” arrangement to what is intended.

Similar to the CitySprint case above, this is an important reminder that Courts and Tribunals will look behind what is in the written terms and examine the reality of the situation when deciding employment status.