A WORKER BY ANY OTHER NAME…
The Impact of the Pimlico Plumbers Case for Employers
If you own your own business, you may owe those who carry out work on your behalf additional rights and payments. A recent Supreme Court decision may significantly affect the manner in which workers are engaged.
Mr Smith was engaged by Pimlico Plumbers Limited as a plumbing engineer and he took a number of complaints to the Employment Tribunal, including that he, as a worker, had suffered unlawful deduction of his wages, non-payment of statutory annual leave and discrimination on the grounds of disability. The Employment Tribunal agreed.
Pimlico Plumbers were unable to accept that Mr Smith was a worker rather than genuinely self-employed and therefore appealed the decision to the Employment Appeals Tribunal, the Court of Appeal, and finally to the Supreme Court.
Characteristics of a Worker
The Employment Rights Act 1996 sets out the following conditions for an individual to be classified a worker:
In Mr Smith’s case, there was no doubt that a contract existed and therefore the Court focused on the need for personal service and the relationship between the parties.
Personal service is ultimately decided upon whether the person in question is genuinely able to substitute someone else to complete the work on their behalf. In his written service agreement, Mr Smith was able to substitute himself for another company engineer but could not assign his work to any external engineer in this field. The Court concluded that this limitation indicated that personal service was a significant feature of Mr Smith’s work for Pimlico Plumbers.
The Court identified that Pimlico Plumbers had a significant amount of control over Mr Smith’s working practices. This is inconsistent with them being a customer of his. He was required to wear a Pimlico Plumbers uniform and drive a van which bore the company logo. He was also required to carry a Pimlico Plumber ID card and needed to make himself available for their work for a minimum of 40 hours per week. Pimlico Plumbers took the view that as Mr Smith took on some of the financial risk in relation to unpaid invoices, he was an independent contractor. The Court, however, was not persuaded by this argument.
The Risks for Employers
The classification of an individual as a ‘worker’ will ultimately turn on the facts of each individual case. However, as a potential employer, you need to be aware of the additional rights of workers and the obligations you face.
A worker is entitled to the following rights:
Should any of these rights be breached, a costly claim could be made against you as an employer.
The impact of this case is an important reminder for businesses that the label given to any working relationship is irrelevant; the status of any individual will be decided upon the reality of the circumstances, to include the conduct of the parties. Simply calling an individual a “self-employed contractor” will not automatically mean they cannot be a worker or indeed an employee.
It is therefore important to assess the true nature of the engagement with a view to understanding their real status and ensuring that correct procedures are in place and followed.
This is however not new as a concept. The case raises an issue that tribunals throughout the UK have grappled with for years, and it is an issue which even the HMRC consider and deal with in a similar manner, through IR35. Although, whilst a finding by HMRC may be indicative it would in itself still not be binding on a Tribunal.
For further advice on any of the issues raised in this article, or any other employment law issue, please contact Jason Alcock on 01543 263456 or email firstname.lastname@example.org.