...for Uber drivers and CitySprint couriers has continued in the Court of Appeal's decision in Pimlico Plumbers Limited and Charlie Mullins v Smith.
Gary Smith worked for Pimlico Plumbers as a plumber from August 2005 until May 2011, when he was dismissed following a heart attack in January 2011. His original contract with Pimlico Plumbers referred to him as a "sub contracted employee" and incorporated Pimlico's company procedures and Working Practice Manual. This manual set out extensive rules for the provision of Mr Smith's services including that:
This contract was replaced by a more detailed agreement in September 2009, which referred to Mr Smith as a "self-employed operative". This stated that:
In practice, Mr Smith decided his own working hours. Pimlico Plumbers had no obligation to provide work on any particular day. If there was not enough work, none would be provided and he would not be paid. He had discretion whether to negotiate on price, covered substantial costs of materials himself, provided his own protective clothing and used his own accountant to file his tax returns.
Following his dismissal, Mr Smith brought claims against Pimlico Plumbers for unfair and wrongful dismissal and against its Managing Director, Charlie Mullins, for disability discrimination. In order to allow him to proceed with those claims, a Tribunal would have had to be satisfied that he was:
The Employment Tribunal held that Mr Smith was not an employee for unfair dismissal purposes because there was no legal obligation on Pimlico Plumbers to provide him with work. The Employment Judge also felt this the Company's right to withhold payment if its customer had not paid and his obligation to rectify problems in the work at his own expense were also inconsistent with an employment relationship, as were the views of the parties themselves and the degree of financial risk borne by Mr Smith in buying materials in advance and in the work taking longer than estimated and therefore being less lucrative.
The Employment Judge did, however, hold that Mr Smith was a "in employment" for the purposes of his discrimination claim and a worker. She felt that Mr Smith had sufficient obligation to provide his services personally to be a worker and held that he was under an obligation to provide work personally for a minimum number of hours per week on the days agreed with Pimlico Plumbers.
Both parties appealed the elements of the Tribunal's decision that went against them.
The EAT upheld the decision on employment status saying that the relationship simply did not look anything like a contract of employment. It also supported the decision on worker status and concluded that there wasn't an unfettered right to provide services through a substitute, which was enough by itself to determine the worker status issue.
Mr Smith did not appeal the decision that he was not an employee. Mr Mullins and Pimlico Plumbers appealed the decisions on worker status and being in employment for discrimination purposes to the Court of Appeal. However, their appeals were unsuccessful.
The Court of Appeal conducted a thorough review of the cases that dealt with whether a contractual right to provide a substitute was inconsistent with an obligation to provide work personally (and therefore defeated a claim to worker status). It then set out the following helpful summary of the principles that apply:
An unfettered right to substitute another person to do the work is inconsistent with an undertaking to do so personally.
A conditional right to substitute another person may or may not be inconsistent with personal performance depending upon the precise contractual arrangements and, in particular, the extent to which the right of substitution is limited or occasional.
A right of substitution which only applies when the contractor is unable to carry out the work will usually be consistent with personal performance
A right of substitution which is only limited by the need to show that the substitute is as qualified as the contractor to do the work will usually be inconsistent with personal performance
A right to substitute only with the consent of another person who has an absolute and unqualified discretion to withhold consent will be consistent with personal performance.
In Mr Smith's case, the Court held that Mr Smith had a personal obligation to provide his services. It also held that Mr Smith had acknowledged he had a contractual obligation to work a normal 40 hour week, even if that was not enforced by Pimlico Plumbers, and even though Pimlico Plumbers had no corresponding obligation to offer him work if there was none to offer him. He was therefore a worker.
Despite the series of recent cases in which individuals have been held to be workers even though their contracts stated that they were self-employed contractors, there is still scope for the self-employment contractor model to operate without engaging either employee or worker status. However, businesses seeking to engage individuals on this basis must take care to ensure that the individuals providing the services genuinely meet the necessary criteria such as exercising a genuine right of substitution.
It will also be interesting to see whether this area will be significantly affected by the forthcoming Taylor review and the updated Employment Status Review recently published by the Department for Business, Energy and Industrial Strategy (BEIS), which acknowledges the complexity of determining whether you are an employee, a worker or genuinely self-employed and suggests options for possible future reforms ranging from a rebuttable presumption of employee status (described as a more radical option) through to guidance on particular issues (for example, holiday entitlements).