Supreme Court plumber Judgment, reinforces rules on employment status case

The Supreme Court has delivered its Judgment in the important and long running case of Pimlico Plumbers Ltd v Smith. This is the latest in a series of…

The Supreme Court has delivered its Judgment in the important and long running case of Pimlico Plumbers Ltd v Smith. This is the latest in a series of cases to scrutinise employment and worker status. The high profile Judgment will inevitably lead to further questions about who is a worker. However whilst the Supreme Court has not taken the opportunity to rethink employment status, the Judgment still provides us with some important pointers.

The facts

Following a heart attack in January 2011, Mr. Smith requested to reduce his working hours from five days to three days a week. His request was refused and his engagement brought to an end. This led to an argument in his employment tribunal claim, about whether he was actually self-employed, whether he was a worker, or whether he was employee.

The Employment Tribunal, Employment Appeal Tribunal (‘EAT’) and Court of Appeal all found that he was in fact engaged by the company as a worker (albeit not an employee).

The decision

The Supreme Court upheld the decision of the Court of Appeal and found that Mr Smith was engaged as a worker.

The Court focussed on two key questions. Firstly, was Mr Smith required to perform his work personally? If so, this would strongly indicate that he was engaged as a worker rather than genuinely self-employed. Secondly, could Pimlico Plumbers reasonably be regarded as a client or customer of Mr Smith? If not, this would also point towards worker status.

On the first question, Pimlico Plumbers argued that personal service was not required, as Mr. Smith was able to send a substitute to do his work (although this right was not explicitly set out in his contract). However, the Supreme Court held that this right was limited, as “the substitute had to come from the ranks of Pimlico operatives, in other words from those bound to Pimlico by an identical suite of heavy obligations”. The requirement for personal service remained a “dominant feature” of Mr Smith’s contract, which focussed on his own personal skills and competencies and was drafted in terms that clearly imposed personal obligations (referring for example to “your skills” or “your appearance”). In the Supreme Court’s view, Pimlico’s argument that these parts of the contract could equally apply to a substitute appointed by Mr Smith “stretches their natural meaning beyond breaking point”.

On the second question, the Supreme Court concluded that Pimlico Plumbers was not a “client or customer” using Mr. Smith’s services, as the company dictated in many ways what he could and could not do. Although Mr. Smith could undertake work outside the company, bore some financial risk and had a degree of control over how work was carried out, other factors “strongly militated against recognition of Pimlico as a client or customer of Mr. Smith” These included Pimlico’s “tight control over Mr Smith’s attire and the administrative aspects of any job, the severe terms as to when and how much it was obliged to pay him, and the suite of covenants restricting his working activities following termination”.

Why is the Judgment important?

The question of whether an individual is self-employed or is a worker is crucial, as the latter are entitled to certain employment-related benefits such as paid annual leave, rest breaks, the national minimum/living wage, the right to be auto-enrolled into a qualifying pension scheme, and protection from detrimental treatment if they make a protected disclosure.

The case once again highlights the difficulty many employers face in balancing the need for consistency and quality against maintaining flexibility. It also reinforces the core message emerging from recent ‘gig economy’ Judgments, that what you say in your documents will not decide the status of the individuals you engage. Indeed the Supreme Court was critical of this employer’s use of “carefully choreographed” self-employed documentation, whilst also trying to achieve the inconsistent objective of presenting the plumbers as part of their workforce and exerting control over their activities.

What does this mean for me?

As a Supreme Court decision, this case is legally significant and must be taken into account if a similar issue is considered in future. It is an interesting and useful addition to the growing body of case-law on employment status.

However, in truth, this Judgment is not ground-breaking. The decision re-affirms that the employment tribunal was entitled find that Mr Smith was a worker. Crucially though, it does not decide that all people engaged on the same basis must be workers, nor does it provide any new guidance or hard and fast rules.  This is disappointing as there was some speculation that the Supreme Court might use this case as an opportunity to really dissect employment status issues and provide some fresh insight.

One of the most important issues addressed in this case is the degree to which a power to send a substitute to do the work can stop someone being a worker. If an engager doesn’t care who does the work (as long as someone does it), and the contractor can send anyone along to do it, the contractor is not a worker (as was the case with cycle couriers working for Deliveroo). This Judgment looks in some detail at where the dividing line lies when there is a limited power to substitute.  To that extent it is an important decision. This Judgment reinforces that an occasional power of delegation does not stop the person being a worker, and potentially expands the range of situations where this reasoning might apply.

Mr Smith was able to ask someone else to do the work and could do so for a relatively broad range of reasons, including if a more lucrative job came along (not just for example when he was ill or on holiday). However, the Supreme Court agreed that, because this right to delegate was limited to other Pimlico staff, it was more akin to a member of a workforce swapping shifts, rather than a genuine right to substitute.

For a variety of commercial reasons, you may wish to ensure that only operatives on a defined list or who are signed up to your organisation’s terms, perform work for you.  However, it is important to be aware that, if you impose such restrictions, your operatives are still likely to be workers (even if they can arrange for someone else from your organisation to carry out work in their place).

The Supreme Court’s role is to consider whether the Employment Tribunal that first heard the case was entitled to reach the decision it did, and whether its reasoning was legally sound. The Supreme Court concluded here that the Employment Tribunal was entitled “by a reasonable margin” to find that Pimlico was not a client or customer of Mr Smith. This arguably shifts the test slightly more in favour of a finding of worker status.

Comment

Remember that the decision as to whether someone is a worker or employee is fact-sensitive, and will involve a careful analysis of a range of relevant factors and the actual working arrangements which apply.  Indeed, different Tribunals may even correctly make different decisions based upon the same facts. Whilst we do not agree with the view of the Pimlico Plumbers Chief Executive that this will lead to a “tsunami of claims”, it does mean that it is as important as ever to take advice about the engagements you have in place.

Phil Allen (phil.allen@weightmans.com) is a Partner in the Employment, Pensions and Immigration Team and is based in Manchester. If this case raises any issues for your business, please do not hesitate to contact Phil or speak to your usual Weightmans advisor.

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