Gary Smith, a plumbing and heating engineer, carried out work solely for Pimlico Plumbers Ltd (Pimlico) for 6 years until 2011. After suffering a heart attack in January 2011 Mr Smith sought to reduce his hours to 3 days a week.
His request was rejected by Pimlico and the van he rented was taken away.
He subsequently claimed:
- unfair dismissal,
- unlawful deduction from his wages,
- that he had not been paid for a period of statutory annual leave, and
- that he had been discriminated against by virtue of his disability.
The employment tribunal decided that Smith had not been an ‘employee’ under a contract of employment and therefore that he was not entitled to complain of unfair dismissal. However, the tribunal held that he was a ‘worker’, in that he was personally required to perform work for Pimlico who were not his client or customer. This meant that Smith could legitimately proceed with his claims 2-4 above.
Pimlico appealed on the basis that Smith was self-employed and not a worker.
The Supreme Court decision
The Employment Rights Act 1996 defines a worker as someone who works under a:
- contract of service; or
- a contract to perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer.
The Supreme Court was invited to review whether Mr Smith was a worker within the meaning of (b) under the 1996 Act. As a result it split the definition into its 2 parts by asking first whether there had been personal performance and secondly whether Pimlico was a client or customer.
Was there personal performance?
The Supreme Court noted that a right to substitute does not automatically defeat personal performance but will depend on its scope. In this case, the tribunal was entitled to find that Smith’s only right of substitution was with another Pimlico operative.
It was relevant to the question that the right to substitute was not included in the terms of the relevant contract.
The provisions of the contract demonstrated that issues of performance, conduct, appearance and identification were addressed to Smith personally and the contention by Pimlico that they were capable also of applying to anyone who substituted him stretched their natural meaning beyond breaking point.
The dominant feature of Smith’s conduct was, as a result, held to be an obligation of personal performance. The limitation of the right to substitute was significant; the substitute had to come from the ranks of Pimlico operatives, who were bound by identical heavy obligations.
Not a client or customer?
The Supreme Court found that the definition of a category of people in the legislation by reference to a negative was unusual and clumsy.
1. Umbrella Contract
In answering this question the Supreme Court first looked at whether Pimlico had a contractual obligation to offer work between jobs, in other words an ‘umbrella contract’.
In looking at whether an umbrella contract existed, the court found that there was a stark contrast between the terms of the relevant contract and the staff manual.
The contract provided that:
’[T}he Company shall be under no obligation to offer you work and you shall be under no obligation to accept such work for the Company’.
Whereas, the manual stated:
’Normal Working Hours consist of a 5 day week, in which you should complete a minimum of 40 hours’.
The Supreme Court found that Pimlico had a contractual obligation to offer work to Smith, but only if it was available. Smith’s contractual obligation was, by contrast, to keep himself available to work for up to 40 hours on 5 days each week on such assignments as Pimlico might offer him.
Therefore, it was legitimate to find that Pimlico cast obligations on Smith during the periods between his work on assignments and this created an umbrella contract between them.
2. Relevant considerations
The Supreme Court asked itself what considerations should an inquiry into the existence of worker status by conducted?
It then went on to endorse the judgment in Cotswold Developments Construction Ltd v Williams 
where it was said that on the one hand there needs to be:
- focus on whether the purported worker actively markets their services as an independent person to the world, and
- whether he is recruited as an integral part of the business.
Equally the judgment in Hashwani v WDFG UK Ltd 
was relied on, which posed that the question to be answered was whether:
- the person performs services under the direction of another person in return for which they are paid; or
- are they an independent provider of services who is not in a relationship of subordination with the service receiver.
The Supreme Court concluded that:
- Smith was entitled to reject any particular offer of work, whether because of the location, timing of it or for any other reason;
- he was free to take outside work, albeit not if offered by Pimlico’s clients;
- Pimlico reserved no right to supervise, or otherwise interfere with, the manner in which Smith did his work; and
- there were financial risks, as well as advantages, consequent upon Smith for his work for Pimlico.
On the other hand:
- Smith was obliged to wear the branded Pimlico uniform;
- Smith had to drive its brand van, to which Pimlico applied a tracker;
- Smith had to carry its identity card;
- the administrative instructions of its control room had to be followed by Smith;
- there were severe terms as to when and how much Pimlico was obliged to pay Smith;
- the contract made references to “wages”, “gross misconduct” and “dismissal”; and
- there was a suite of obligations restricting Smith’s working activities following termination.
Accordingly, there were features of the contract which strongly militated against recognition of Pimlico as a client or customer of Smith.
Is the gig up?
The decision although highly factual does clarify the law in this area and will make it harder for employers to create artificial self-employment by relying on a right to substitute in a pool of its own workforce. This ruling will also potentially make it more difficult for employers to create a client/customer relationship by removing obligations between jobs. Further, it has made it clear that if a person is integral to the business and is in a relationship of subordination then it will be very difficult for an employer to show that they are not ‘a worker’.
The decision by the Supreme Court will not end the gig economy, however it does shoot a glancing blow at tactics used to create artificial working environments which will not stand up to scrutiny. It emphasises that the courts will not be fooled by these arrangements and presents a heavy burden on the employer in showing that an individual is genuinely self-employed.
Author, Joshua Platt, is a Trainee Employment Solicitor working alongside Director Anthony Thompson who has over 20 years’ experience in this area. Under Anthony’s supervision Joshua assists in matters relating to unfair dismissal, discrimination; and unlawful deduction from wages.
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