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A leak in the system?

The Supreme Court has issued its judgement in the case brought by Gary Smith against Pimlico Plumbers which will have ramifications for those businesses which use freelance workers to meet their customer demand.  If you are a business which uses freelance workers, or rather a business which thinks it uses freelance workers that are self-employed; then following this decision you may need to think again about the contracts you have in place with those workers and what your obligations are.

The Pimlico Facts

  • Gary Smith had worked for Pimlico Plumbers for 6 years.  Mr Smith raised a Tribunal claim against Pimlico on four grounds
  1. That he had been unfairly dismissed by Pimlico;
  2. That Pimlico had made an unlawful deduction from his wages;
  3. He had not been paid statutory annual leave;
  4. He had been discriminated against on account of his disability.
  • An Employment Tribunal determined on the facts that Mr Smith was not an employee, so he was not unfairly dismissed. It did however decide that he was a worker and he therefore was entitled to bring his claims for unlawful deduction of wages, non- payment of statutory leave and discrimination.
  • Pimlico unsuccessfully appealed the decision to the Employment Appeal Tribunal and to the English Court of Appeal.
  • Pimlico appealed to the Supreme Court.

The Supreme Court’s View

The Supreme Court agreed with the Employment Tribunal and said that Mr Smith was a worker and that he was entitled to go ahead with his claims.

Decisions on whether an individual is a worker or self–employed have always turned an assessment of their own facts. The factors that employment lawyers always look at are: is an individual personally responsible for the work; do they have the right to substitute someone else to do the work; can they turn down the work; is the work supervised; who carries the financial risk; who pays the national insurance; who pays the tax; has an individual been provided with a uniform and/or uniform to carry out the contracted service.

The Supreme Court’s approach was no different.

The Supreme Court’s view was that to be a worker, Mr Smith had to have “undertaken to “perform personally” his work or services for Pimlico. The Supreme Court looked at the contract and manual which Mr Smith had been provided with by Pimlico. None of those documents gave Mr Smith an express right to appoint a substitute to do his work other than to another Pimlico operative.

In trying to persuade the court that Mr Smith was self -employed, Pimlico tried to reply on the fact that Mr Smith had presented himself as self-employed for the purposes of income tax and VAT. It also tried to argue that Pimlico was a customer of Mr Smith on the grounds that:

  1. Although Mr Smith was contracted to make himself available to work for up to 40 hours per week, he was entitled to reject the offer;
  2. Mr Smith was free to take on work for other customers;
  3. It did not supervise or interfere with the work carried out by Mr Smith
  4. There were financial risks for Mr Smith, e.g. he would not be paid by Pimlico until the end user paid Pimlico.

In dismissing those grounds, the court took account of the following factors:

  1. Pimlico required Mr Smith to wear their branded uniform,
  2. Pimlico required Mr Smith to drive its branded van which also had a tracker,
  3. Pimlico required Mr Smith to carry a Pimlico identity card
  4. Pimlico required Mr Smith to follow its instructions.

 

The Future

Pimlico’s Managing Director has said that the decision was “poor” and it “will potentially leave thousands of companies employing millions of contractors wondering if one day soon they will get nasty surprises from a former contractor.”

One commentator has suggested that the issue over whether an individual is an employee, worker or self employed is still “up in the air.  Another has suggested, and it’s a view I agree with that most “cases would continue to be argued on their specific facts.”

My advice to businesses who think that they have self-employed contractors is that they should go back and look at their contracts and compare that to how the individual performs their services in practice and then think are they, as a matter of fact, truly  self- employed? Do I need to accept that they are a worker or an employee?  Plug that hole now – don’t be on the back foot in a tribunal claim!

If you have any questions of these types of contracts, then please contact Julie Sullivan.

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