Employment status – the Supreme Court has its say in Pimlico Plumbers

14 June, 2018
by: Cripps Pemberton Greenish

Yesterday, the Supreme Court handed down its judgement in the case of Pimlico Plumbers Limited and another v Smith [2018] UCSC 29.

The result of this decision was the dismissal of Pimlico Plumbers’ appeal, with the Supreme Court confirming Mr Smith’s status as a worker rather than a self-employed individual.

We previously covered the background to this case in our blog, ‘Worker status – the plot thickens’. In summary, the issues in consideration were:

  1. whether Mr Smith was required to perform work personally; and
  2. whether Pimlico Plumbers was a client of Mr Smith.

The distinction between employee, worker or self-employed status is vital in determining an individual’s rights and protections. A self-employed individual will have a lower level of legal protection than an employee or worker, for example they do not have the right to national minimum wage and holiday pay.

One of the factors in determining employment status is whether there is a genuine right to appoint a substitute.  The Supreme Court examined Mr Smith’s right to appoint a substitute and found that Mr Smith’s contractual entitlement to do so was subject to several limitations. In particular, his substitute had to be another individual engaged by Pimlico Plumbers on terms similar to those by which Mr Smith was bound. The Supreme Court concluded that this limited right was not enough to rebut the overriding obligation for Mr Smith to provide his services personally.

The Supreme Court also examined whether Pimlico Plumbers was Mr Smith’s client.  In doing so it looked at the contractual relationship between them. The contractual documents did provide Mr Smith with certain freedoms associated with self-employment, which included his ability to reject offers of work and to take assignments from other parties.  Pimlico Plumbers were however found to also exercise considerable control over Mr Smith.  This included dictating what he wore at work, his administrative duties and the terms on which he was paid.  Overall, it found that such a level of control was more indicative of an employer-worker relationship between the parties, than one of self-employment.

Taking these factors together, the Supreme Court concluded that Mr Smith was in fact a worker and was therefore entitled the additional legal rights enjoyed by workers.

What next?

The Supreme Court’s decision emphasises that it is form, not substance, which determines an individuals’ employment status. Businesses must structure their engagements to ensure that they accurately reflect the nature of their relationships as the Courts will look beyond the contractual documentation to establish the true working relationship between the parties.

Mr Smith can now feel confident in the recognition of his status and rights, but for many others uncertainty remains. Last year the government commissioned the Taylor Review, which made recommendations in respect of employment status (see blog) Taylor-made ideas for overhauling employment law and it has recently launched a consultation on ‘off payroll’ workers in the private sector (see blog) Consultation document heralds a reform to the taxation of contractors working through personal service companies.  Meanwhile the ‘gig economy’ continues to grow and others in the position of Mr Smith and Pimlico Plumbers continue to look to parliament for clarity and guidance.

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