Blog: ‘Independent contractor’ wins worker status
Katy Wedderburn and Rhea McKenzie analyse yesterday’s employment judgment from the Supreme Court.
The UK’s highest court has handed down its judgment in the Pimlico Plumbers case, ruling that Gary Smith was a worker despite being VAT-registered, paying self-employed tax and working under a contract describing him as an “independent contractor”. The decision upholds previous findings of the Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal who had all reached the same conclusions in favour of Mr Smith.
The employment status distinction is important because, unlike truly self-employed individuals, workers are entitled to limited employment rights (such as the national minimum wage and holiday pay; protection from discrimination; and as “whistleblowers”) while employees are entitled to additional rights (such as protection from unfair dismissal).
Mr Smith carried out work solely for Pimlico since 2005 and brought claims in the employment tribunal (including failure to pay holiday pay, unlawful deductions from wages and disability discrimination) after Pimlico terminated its arrangement with him in 2011. The employment judge was required to determine whether Mr Smith was a ‘worker’ and was, therefore, entitled to employment rights under the Employment Rights Act (“ERA”), the Equality Act and the Working Time Regulations.
The ERA definition of worker requires that a worker undertakes to do or perform personally any work or services for another party who is not a professional client of his. Mr Smith had no express right in his contract to appoint a substitute to do his work and only had a limited ability to swap a shift with another Pimlico Plumber. The Supreme Court dismissed Pimlico’s argument that this limited ability was sufficient to dodge the personal performance test, confirming that the employment judge was entitled to find that the dominant feature of Mr Smith’s contractual documentation was for him personally to perform the work.
Although Pimlico were not obliged to offer any work and Mr Smith was not obliged to accept any work offered, these issues did not prevail over the factors pointing against Pimlico being a client of Mr Smith’s. For example, Mr Smith was:
• required to work a minimum number of hours and Pimlico controlled when and how much payment he received;
• required to wear a Pimlico branded uniform and rent a Pimlico branded van; and
• bound by restrictive covenants upon termination of the arrangement with Pimlico.
The fact that Mr Smith was an integral part of Pimlico’s operations and the relationship of subordination were key indicators that Pimlico was not a client of Mr Smith which would have meant he was not a worker.
It is likely that the guidance set out in the Supreme Court’s judgment on these points could affect a number of other cases currently progressing through the lower courts which also consider employment rights and status in the context of the so-called gig economy. For example, Uber’s appeal to the Court of Appeal following the recent EAT finding that drivers engaged by Uber should be classed as workers for the purposes of employment legislation which will be heard towards the end of this year. The government has also recently finished consulting on a number of issues in relation to the Taylor Review of modern working practices and, in particular, in relation to employment status.