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Pimlico Plumbers and Mr Smith - latest judgment: self employed contractor entitled to holiday leave and pay as a "worker"

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Judgement was recently given by the Court of Appeal on a landmark case in the field of employment, Pimlico Plumbers and Mullins v Gary Smith, which has been working its way though the courts.

It has put plumbers engaged with Pimlico in the spotlight for similar reasons as for other groups working within the “gig economy” such as the Uber drivers and the Deliveroo couriers in recent reported successful legal claims – the courts have decided on the facts of the individual cases that they are “workers” and entitled to extended working rights such as annual leave and pay, despite their apparent self employed status.

The latest ruling rejects appeals by Pimlico and upholds decisions made by the original Tribunal Judge in favour of Mr Smith in the first hearing of the case as correct. The decision could affect huge numbers of people amongst the estimated 4.5 million self employed contractors in the UK and the businesses engaging them, because it confirms they may have extended rights at work as “workers” if they have similar features in their contracts and their working arrangements. Whether or not the individual pays tax as a self employed person, for which different tests are used by HMRC, is irrelevant to these working rights at present.

The cases concern an individual’s employment status which dictates the specific legal statutory working rights and entitlements for that individual. There are three main categories of employment status:

  • Employee – where a contract of employment exists. This gives the full range of employment rights including protection from unfair dismissal, right to a redundancy payment, annual leave and pay, sick pay.
  • Worker – where a contract for service to do work personally exists ( or an employment contract as above).This gives a more limited range of working rights, including to annual leave and pay; to be paid  at least the National Minimum Wage level and no unlawful deductions from wages.
  • Self employed – where neither of the above types of contract exists. This attracts a very limited range of working rights eg health and safety, working time and (with qualifications) discrimination protections.

It can be difficult to determine which category (and therefore which set of working rights ) applies to individuals apparently contracted with businesses as self employed contractors and who are self employed for tax purposes.

Labels applied by the employer to the relationship at the start, or indeed written contract terms, might be meaningless. The case of Autoclenz v Belcher & Ors [2011]  established that a court can look behind the contract wording/ express contract terms to the day to day reality of the specific working arrangements, if that is different to what is in the contract, to decide on employment status. In the end it was not necessary in the Pimlico case for the judges to do so because the wording of the contract and the lack of certain express terms, not contradictory to the actual working arrangements, was sufficient to clarify Mr Smith’s employment status.

Status depends on the precise wording of contract documentation and on individuals particular and specific work arrangements.

The Court of Appeal again examined again in great detail the written contract terms alongside the work arrangements between Mr Smith and Pimlico Plumbers and the obligations of the parties, to establish whether the original Tribunal Judge’s decisions were correct on Mr Smith’s employment status.

The facts

Mr Smith had worked under an apparent self employed contract for Pimlico for 6 years. He paid tax on a self employed basis and was registered for VAT. He had also agreed with Pimlico that their Manual of terms and conditions would apply to him. Amongst other conditions these required him to work 40 hours per week, limited his right to work for other companies or for himself, could use only other Pimlico operatives to do his work and to use a Pimlico van.

After having a heart attack and a period of illness he asked to work fewer days, which was refused. Pimlico also took away his van, terminated his engagement and he claimed to have been dismissed.

He then brought claims against Pimlico for unfair dismissal, wrongful dismissal and other claims, asserting he was an employee under a contract of service.

In addition, he claimed holiday pay and unlawful deductions from wages as a worker under a contract for services, for which he did not need to prove he was an employee. but had to show that he was employed under a contract where he undertook to perform personally any services and that Pimlico was not a client or customer of his.

Finally, he made claims for disability discrimination under the extended definition of employee under the Equality Act, for which he had to similarly show he was employed under “a contract personally to do work”.

Employment Tribunal decisions

In the original Employment Tribunal preliminary hearing the Judge dismissed his claims to be an employee and so his employee claims eg for unfair dismissal, wrongful dismissal failed. That decision was upheld by the Employment Appeal Tribunal previously on appeal and was not further appealed by Mr Smith this time.

The original Tribunal Judge had decided that on her interpretation of the wording of his  contract and the Pimlico Manual that there was a requirement for personal service from Mr Smith. There was no express contract term permitting Mr Smith absolute freedom to substitute any other person to do his work and no evidence that in reality he was allowed to do so either. Mr Smith had some autonomy in carrying out the work but Pimlico otherwise exercised tight control, including on working hours. Mr Smith was therefore a worker. He was also qualified for discrimination protection as he was employed under a contract personally to do work.

The latest judgment

The Court of Appeal agreed with the original Tribunal judges decision that Mr Smith was a worker (within the meaning of s.230(3)(b)of the Employment Rights Act 1996 and the Working Time Regulations 1998). As such he was entitled to paid annual leave and rest breaks and could also claim for unlawful deductions from wages.

It also agreed that Mr Smith was employed under a contract to do work personally, which gave him protection from disability discrimination under the extended definition of employee in the Equality Act 2010.

Pimlico Plumbers appeals’ against those decisions were therefore dismissed by the Court of Appeal.

This may not be the end of this case as Pimlico Plumbers say they are considering appealing up to the Supreme Court, but this may be unlikely given the consistency and thoroughness of the court rulings at three successive levels so far.

The key points from the latest judgment should be considered very carefully by the wide range of businesses who engage individuals on a freelance or self employed basis, to check their potential liability as claims for back dated holiday pay can be expensive. The growing numbers of “self employed” contractors may also wish to check their contract terms and arrangements to see if they, like Mr Smith, have more working rights than they originally thought and the take up of which – so far- does not necessarily affect their self employed tax status.

The Court of Appeal judgment can be viewed here.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.