We’ve been watching the employment law case involving London-based Pimlico Plumbers with great interest. Now before the Supreme Court, the case centres on the claim by Gary Smith, an engineer, that he was a ‘worker’ at the plumbing giant (affording him greater employment law protection). Pimlico argues that Mr Smith was a self-employed contractor and they owed him few legal obligations.
It’s a case that could have widespread ramifications for the way we interpret employment contracts in future. It also demonstrates the different rights and obligations that arise depending on the nature of an individual’s employment with a particular company.
Last year the Court of Appeal decided Mr Smith was indeed a worker. It relied on the fact that he had to work a certain number of hours each week for Pimlico Plumbers. He also had to use a Pimlico Plumber branded vehicle when working for the company.
If the Supreme Court confirms his designation as a worker, Mr Smith could potentially bring claims against Pimlico Plumbers under disability laws and seek holiday pay.
GREATER PROTECTION FOR GIG ECONOMY WORKERS?
If Pimlico Plumber’s appeal does ultimately fail the result could bolster the rights of the huge number of British workers now working in the so-called ‘gig economy’ on freelance or short-term contracts. (It’s estimated that there are about a million people working in the gig economy in Britain in sectors ranging from legal and accountancy services to manual work, cleaning services and courier services.)
Because of the potential impact on gig economy workers some say the case is hugely significant. Others are not so sure saying Mr Smith’s employment status at Pimlico was so unique that the case will actually have little effect beyond the case itself.
UNPICKING SHAM CONTRACTS
Whatever way the Pimlico Plumber case unfolds we believe there is a trend by the courts to unpick what are sometimes described as ‘sham contracts’. More and more the courts prepared to:
- examine the reality of working relationships
- look beyond the wording of any legal agreement between businesses and individuals when assessing employment status
- decide on and give effect to the precise nature of the agreement between the parties
We have already seen this approach by the Employment Appeal Tribunal in a case brought by drivers working for the cab-hailing app Uber. The tribunal ruled that Uber drivers were in fact ‘worker’s, finding that the relevant employment paperwork did not reflect the true working relationship between Uber and its drivers. The court even described the idea that Uber effectively amounted to 30,000 small businesses across London as ‘faintly ridiculous’. Uber is appealing the judgment.
THE GOVERNMENT’S GOOD WORK PLAN
The government too looks set to address the fluctuating nature of the modern workplace. Just this month it has launched its ‘Good Work plan’ , which aims to:
- enforce vulnerable workers’ holiday and sick pay for the first time
- introduce a list of day-one rights including holiday and sick pay entitlements and a new right to a payslip for all workers, including casual and zero-hour workers
- allow all workers to request a more stable contract, providing more financial security for those on flexible contracts
The Institute of Directors has described the initiative as possibly ‘the biggest shake-up of employment law in generations”. While protecting vulnerable workers is a worthwhile aim, it’s important that the changes do not result in increased red tape for employers already burdened with a vast amount of employment law regulation.
DEFINING EMPLOYMENT STATUS
There are three types of employment status:
- Employee
- Worker
- Self employed
Each category has different employment rights with employees the most robustly protected and self employed virtually no protections.
When advising businesses on the contractual arrangements they have with individuals there are certain key questions our employment lawyers ask to decide whether someone is a worker, employed or self employed. These include:
- Can the individual work for a number of employers at the same time?
- Can the employer appoint or dismiss the individual?
- Is there some kind of mutual obligation (for the company to provide work and the individual to perform it)?
- Can the individual get someone else to perform the work (substitution)?
- What are the tax implications of the work?
CHECK YOUR CONTRACTS NOW: YOU COULD FACE HEFTY TAX BILLS
With the shift in approach to employment contracts by courts and government it’s now essential for companies who employ contractors or short term workers to review their contracts and ensure they will stand up to scrutiny.
Just because you have an agreement with a freelancer or contractor that is described in a particular way does not mean it will be viewed as such if questioned. More and more it is essential to examine the reality of the worker/employer relationship to see whether it is more akin to a worker or employee agreement.
There is a real danger that if your arrangements with those who do work for your company do not reflect reality and instead are deemed to be ‘sham contracts’ you will face considerable back tax bills and fines. Remember, courts are now prepared to look beyond written arrangements.
CONTACT US
Our specialist solicitors provide practical advice on all forms of employment contracts. You can call us on 0203 983 8278 or contact us online.
