In the case of Pimlico Plumbers Ltd and another v Smith, the Supreme Court upheld the finding that Mr Smith, a plumber engaged by the company, was a worker for the purposes of the Employment Rights Act 1996 and the Working Time Regulations 1998, and was an employee within the wider meaning of the Equality Act 2010. This was despite the fact that Mr Smith had entered into a contract in which he was described as an independent contractor.
Under the legislation a worker is an individual who works (or worked) under (a) a contract of employment or (b) any other contract, express or implied, whereby the individual personally carries out work or services for another party under the contract and where that other party is not a client or customer of the individual. Individuals who fall within the second part of this definition are known as ‘limb (b) workers’. Within its definition of employment, the Equality Act 2010 includes “employment under […] a contract personally to do work”. This is has been held to have essentially the same meaning as a limb (b) contract.
Mr Smith worked as a plumbing and heating engineer for Pimlico Plumbers between 2005 and 2011. In 2011 Pimlico Plumbers dismissed Mr Smith. Mr Smith brought a number of claims in the employment tribunal. The tribunal held that Mr Smith had limb (b) worker status but was not an employee within the definition in the Employment Rights Act 1996. Pimlico Plumbers unsuccessfully appealed against the tribunal’s finding of limb (b) worker status to the EAT and the Court of Appeal. Pimlico Plumbers then appealed to the Supreme Court.
The Supreme Court held that the tribunal was entitled to find that Mr Smith satisfied the requirements of a limb (b) worker.
One of the key factors which was considered was whether the requirement for personal performance was met. The court noted the tribunal’s finding that Pimlico Plumbers engineers could swap jobs between themselves and raised the question of whether was inconsistent with an obligation of personal performance. It concluded that, notwithstanding this, the clear direction of Mr Smith’s contract was towards personal performance, and found that that the right to substitute appears to have been regarded as so insignificant as not to be worthy of recognition. The court noted that, importantly, Mr Smith did not have an unfettered right of substitution and he could only swap jobs with individuals who were under the same direct contractual relationship with Pimlico Plumbers and therefore who had the same obligations towards Pimlico Plumbers as Mr Smith.
Another key factor which the court had to consider was whether Pimlico Plumbers was in fact a customer or client of Mr Smith and whether there was mutuality of obligation. The court looked at particular features of the contractual relationship between Mr Smith and Pimlico Plumbers to consider whether this was the case. The court noted that Pimlico Plumbers was obliged to offer Mr Smith work, but only if it was available. Additionally, Mr Smith was required to keep himself available for work for up to 40 hours over five days per week on such assignments as Pimlico Plumbers might offer him. Mr Smith was, however, also free to decline particular assignments. On this basis, the court held that there was an umbrella contract in place between Mr Smith and the company. The court did recognise various contractual features that Pimlico Plumbers pointed to as indicating that it was a customer of Mr Smith, including, for example, the significant financial risks that Mr Smith took on, including, not being paid by Pimlico Plumbers until the client had paid them. Ultimately, however, the court noted the company’s “tight control” over Mr Smith reflected in the fact that, amongst other things, he had to wear a Pimlico Plumbers uniform, drive a company branded van and carry a company ID card. In light of these “severe terms” the court held that the tribunal was entitled to conclude that Pimlico Plumbers was not a client or customer of Mr Smith.
Consequently, the court dismissed the appeal, allowing Mr Smith to pursue his claims for holiday pay, disability discrimination and unlawful deduction from wages in the tribunal as these claims can be brought by a worker.
This case is significant in that it is the first case relating to employee/worker status issues in the context of the gig economy that has been considered by the Supreme Court. The practical significance of the case is limited, however, as the court’s decision is based very much on the facts of the case. That means that tribunals may well reach different decisions in other cases that turn on a different set of facts.
Nevertheless, this case serves as a reminder that tribunals will look past the wording of a contract to consider the practical reality of the relationship between the individual and a company. Companies should therefore be mindful of this when entering into contracts and should ensure that the terms of the contract reflect the actual envisaged circumstances of engagement.
Care should also be taken when terminating contracts if there is a risk that the individual may be a worker as workers are able to bring discrimination claims under the Equality Act 2010.