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The Battle Continues

We have reported previously the ongoing and unrelenting battle between those employed in the so called Gig economy challenging their employment status. The latest company to face such a challenge is the well-known Pimlico Plumbers.

The case was heard by the Court of Appeal and was brought by Gary Smith, who was contracted to work for Pimlico Plumbers as an independent contractor. He worked for the Pimlico Plumbers for six years until 2011. After suffering a heart attack he requested a reduction in his hours and number of days worked in a week. Pimlico Plumbers refused his request and insisted that he returned the Pimlico Plumbers van that he hired from the company.

He brought an unfair dismissal and disability claim against the company arguing that he was an employee and therefore entitled to employment rights. The original Employment Tribunal and subsequent Employment Appeal Tribunal concluded that Gary was a worker rather than an employee and therefore entitled to certain basic minimum employment rights, including minimum pay and holiday rights. Pimlico Plumbers appealed the EAT’s decision.

Alongside Uber and Citysprint, Pimlico Plumbers strongly argued that status of their contractors was that of a self-employed contractor and submitted evidence in support of this assertion. Both parties had entered into an agreement which contained the following clause – “You are an independent contractor of the Company, in business on your own account. Nothing in this Agreement shall render you an employee, agent or partner of the Company and the termination of this Agreement (for whatever reason) shall not constitute a dismissal for any purpose.”

There were also other factors, which in Pimlico Plumbers view, established Gary as a self-employed contractor namely:

  • There was no guarantee that Pimlico would provide him with a particular amount of work.
  • He could choose which jobs he picked up, and the times at which he worked.
  • He provided his own tools and equipment.
  • He dealt with his own tax and national insurance (and was not subject to PAYE).

Whilst the agreement between the parties included a ‘right of substitution’ clause where plumbers could share jobs or be substituted by another Pimlico plumber, The Court of Appeal upheld the EAT’s decision.

The Court of Appeal rejected these arguments and as with the previous judgements defining worker status, the court looked beyond the written word and looked at the day to day reality of the working relationship between the parties. They cited the following as further evidence that Gary was a worker, Gary had to:

  • To provide work personally for Pimlico Plumbers
  • Work set hours on certain days
  • Wear Pimlico’s uniform, which had its logo on it
  • Hire a van provided by the Company
  • Accept restrictions on his ability to work in a competitive situation

You may ask why employment status is important, the key reason is that legal status determines the levels of protection applying to individuals, the differences are:

  • Employees enjoy the full range of employment benefits and protection against unfair dismissal
  • Workers have certain minimum employment rights - such as minimum wage and paid holidays but do not have unfair dismissal rights
  • Self- employed contractors do not have any employment rights or protection

The financial costs of incorrectly classifying an individual can be high, as it can not only lead to Employment Tribunal claims and costs but it also give rise to a potential liability for tax and national insurance with added interest and penalties.

Individuals who work in the so called Gig economy on a self employed basis tend to benefit from more beneficial tax rates than those which would be applied to workers or employees. To identify any abuse of self employed status HMRC has set up an Employment Status and Intermediaries team to investigate potentially fraudulent employment arrangements.

There are further legal challenges in the pipeline and it remains high on the media and Government agenda. The government has commissioned a review, led by Matthew Taylor, chief executive of the Royal Society for the Arts, to look into workers’ rights in the Gig economy. The review will look at job security, pension, holiday and parental leave rights as well as employer freedoms and obligations.

Getting it right

If you are unsure as to the status of your employees or one of your self-employed contractors, HR:4UK can advise you as to what tests need to be applied to determine legal status.

For further help and advice, speak to one of our advisors by calling 01455 444222 or complete our online enquiry click here and an advisor will contact you shortly.

Joe Janda
HR Services Director