Pimlico Plumbers – Worker vs self-employed
A plumber has won the latest round in a long running legal battle for working rights in a Supreme Court ruling issued today.
The case involving Pimlico Plumbers and one of its contractors has gained much publicity but will it have huge ramifications for freelance workers and other sub-contractors in, for example the construction and IT sectors? The case is not about whether the plumber, Gary Smith, was employed or self-employed for income tax purposes but rather was about whether he was a worker or self-employed for employment law purposes. As he has been ruled to be a worker rather than self-employed, he is entitled to core employment rights and protections like sick pay, paternity pay, the right to be paid the National Minimum Wage, in fact all rights an employee would be entitled to apart from paternity/maternity leave, the right not to be unfairly dismissed, redundancy pay and statutory sick pay.
Gary Smith had worked solely for Pimlico Plumbers for six years. Mr Smith, began his battle with Pimlico Plumbers when he wanted to reduce his hours following a heart attack in 2010.
He wanted to cut the five-day week, which he had been signed up to work with the firm, to three. However, the firm refused and took away his branded van, which he had hired. He claims he was dismissed.
Despite being VAT-registered and paying self-employed tax, the Courts had previously ruled that he was not self-employed but was a worker entitled to certain workers' rights. The Supreme Court agreed with and upheld these earlier court decisions.
The decision is not being considered to be a "game changer" as, although there are many similarities with other cases, each case is decided on its own fact patterns and circumstances. Those other companies and situations have different ways of working, different contracts and different ways in which they interact with and supervise their contractors.
The facts in this case were very specific. What swung it for Mr Smith were the terms on which he was engaged enabled Pimlico Plumbers to exercise tight administrative control over him during his periods of work for them; Pimlico imposed fierce conditions on when and how much it paid to him, payments which were described at one point as his wages; and the company was able to restrict his ability to compete with it for plumbing work following any termination of their relationship.
The judgment did acknowledge that there were some aspects of Smith’s conditions that resembled self-employment, such as the entitlement to refuse work and being responsible for dealing with faults and bad debts, but other aspects of the contract with Pimlico didn’t, including the requirement for him to wear a branded uniform, have a tracker in his branded van and carry an identity card. His contract also made reference to “gross misconduct” and “dismissal”.
The Government continues to look at this area and has previously stated its support for last year's Taylor Review into working practices, which concluded that all work in the UK's economy should be "fair and decent" and that people who work for platform-based companies, such as Deliveroo and Uber should be classed as dependent workers with appropriate rights.
The report also proposed changes including stricter enforcement of holiday and sick pay rights, and higher fines for firms that breach contracts or mistreat staff and is the subject of consultation with a view to updating the employment legislation in this area.
For businesses that are concerned that their current arrangements may be impacted by this latest ruling, we would advise them not to panic, as no new principles of law around worker status have been established by this case. However, any company (or partnership or employer generally) which has been engaging contractors on a self-employed basis where those contractors have been working regularly or exclusively for them over a longish period may well have some issues to address unless the contractor is genuinely allowed to send a substitute of their own choosing whenever they think the need arises.
So, such companies will need to review their existing arrangements with their contractors urgently (and this has not been brought about by today’s ruling, this has always been the case) to see what exposure they might have to claims for sick pay, maternity/paternity pay, the National Minimum Wage and the like.
Other companies engaging contractors should be looking at their arrangements with their contractors just to ensure they definitely justify a ruling of self-employment for employment law purposes in each case. And at the same time, although today’s ruling is not about employment income tax, they should also be reviewing those same contractual arrangements to ensure a ruling of self-employment is appropriate for income tax purposes too. They should as well perhaps be considering extending such a review to consider ‘indirect’ engagements (where the engager engages the worker via their own personal service company) as well which may be impacted by the IR35 rules and which may well soon be the responsibility of Private Sector engagers too following the Government’s publication of a consultation paper on this in May.