Pimlico Plumbers case; a spanner in the works for self-employment?
In recent years the courts have been awash with cases in respect of worker status. With the rise of the gig economy, companies are taking advantage of those who want a more flexible way to work by offering ‘self-employed’ contracts. But is this being done at the expense of basic employment rights?
It is often the most vulnerable that are affected by the imbalance of power in such relationships. A prime example of this is in relation to a case involving a City Sprint courier. The courier took the firm to the employment tribunal claiming they were a worker and won. However, instead of changing all contracts to worker status the firm changed the contracts ‘to simplify the language in these, further clarifying the rights and flexibilities available to self-employed couriers who provide their services to us’. It should be noted that in order to enforce worker rights, a claimant will need to issue a claim at the tribunal. This can involve time and money, which many in lower paid jobs do not have.
Pimlico Plumbers Decision
Turning now to the case in hand, however, in which Mr Smith was paid highly for the work he completed, he was also able to add a 20% mark up on materials he charged to customers which he got for discount via the company, and he had a great deal of flexibility in his role. Is this really a vulnerable individual being taken advantage of?
Either way the Supreme Court has determined that Mr Smith was a worker and as such should benefit from the rights associated with this. As a result of another recent decision on worker status that we reported on, his claim for holiday pay could now date back to the start of his employment.
The two main issues for the court to determine were whether Mr Smith had to perform the services personally and whether Pimlico was Mr Smith’s client or customer.
If a person has to personally perform the services under the contract it is likely that they will be deemed a worker. Here the court looked at Mr Smith’s right to send a substitute to determine if he had to personally perform the services
The employment tribunal held that whilst Mr Smith could send a substitute for any reason such as illness, holiday or other reason, he could only send another Pimlico plumber. This was seen as akin to employees swapping shifts. As a result of this limitation the Supreme Court held Mr Smith had to personally perform the services.
The court looked at whether Mr Smith was an independent contractor not in a relationship of subordination with the person who receives the services.
Pimlico tried to argue that they were the client of Mr Smith and he was a business in his own right. They relied on his tax return, which put his annual gross profit at £131,000, costs of materials around £53,000 and his net pre-tax profit at £48,000. The court disagreed with this for the following reasons:
- Pimlico’s tight control of Mr Smith, including Mr Smith wearing branded clothing, driving a branded van and carrying an ID card;
- Mr Smith’s obligations to follow administrative instructions from the control room;
- The fact Pimlico placed a tracking device on Mr Smith’s van;
- The severe terms as to when and how much Mr Smith would be paid (he was paid 50% of the fees paid by the customer) meant he was not economically independent.
As such the Supreme Court found that Mr Smith was not truly independent as there was an element of subordination.
This case does not suddenly change the status of those who are self-employed. As stated above, someone needs to challenge their status in order to be afforded the necessary employment rights; until then the status quo will continue. Even then, simply because one person does challenge their status this will not automatically affect others within that industry.
However, this case is a warning for those that employ self-employed contractors. Now is the time to review contracts and ensure they are truly self-employed. If they are not, you need to take steps to protect your position as the risk to you is much greater.
If you have any questions about this article or need a contract reviewing, please feel free to contact Laura Pearce on firstname.lastname@example.org.
Please note that the information contained in this article was correct at the time of writing. There may have been updates to the law since the article was written, which may affect the information and advice given therein.