In Pimlico Plumbers Ltd v Smith, the Supreme Court upheld a Court of Appeal (CA) ruling that a plumber (Gary Smith), who was purportedly hired as an ‘independent contractor’, was in fact a ‘worker’ under employment rights legislation.
The case, one of a number of decisions affecting, in particular, the ‘gig’ economy has potentially far-reaching implications, including the individuals that employers need to assess for the purpose of automatic enrolment into workplace pension schemes.
The arrangements between Pimlico and Mr. Smith (see the box on the right) were considered by the CA over a year ago. Particular weight was given to the fact that his contract did not permit him to provide a substitute to do his work (a right of substitution indicates self-employment). The terms of the contract required Mr Smith to provide personal service to Pimlico. The presence of restrictive covenants also appeared to be significant (and pointed towards worker status).
The CA held that, whilst Mr Smith was not an employee, he was as a “worker” for employment rights purposes meaning, inter alia, that he was potentially in scope in terms of Pimlico’s workplace pension duties.
Pimlico appealed but the Supreme Court upheld the CA decision, finding that Mr Smith was a worker under the Employment Rights Act (ERA) and the Working Time Regulations. (The definition of ‘worker’ for automatic enrolment is in the 2008 Pensions Act but is the same as the definition in the ERA.)
The court also held that Mr Smith was ‘employed’ by Pimlico as defined by the 2010 Equality Act.
Arrangement between Pimlico and Mr Smith
- Mr Smith was required to wear a Pimlico Plumbers uniform and drive a van with the Pimlico logo
- He had his movements monitored by Pimlico via GPS
- He could only be contacted by customers through Pimlico
- Customer contracts and estimates were issued in the name of Pimlico
- Mr. Smith was, however, required to provide his own tools, equipment and materials, and he was taxed as self-employed and was VAT registered
- According to the contract, there was no obligation on the company to offer and no obligation on Smith to accept work, but he was required to notify the days on which he was unavailable.
The significance of this case is that it is the first time the UK ’s highest court has been asked to consider the employment status issues in question. Also, it would be wrong to assume these just affect the gig economy.
There are still unanswered questions, and further clarity should be provided by the London Uber drivers case (where the drivers have also been held to be workers) and the Taylor Review into modern working practices.
A key message then is ‘watch this space’.
If you are concerned that you may not have properly fulfilled your automatic enrolment duties, because you have contracted with individuals who provide services to them on an independent contractor basis, contact their usual JLT consultant or John Wilson, Head of Technical firstname.lastname@example.org.