Worker status: a busted flush?

What do a plumber, a minicab driver and a bike courier all have in common? According to a string of recent decisions, each of them is a worker and protected by UK employment law. In the most recent decision, the Court of Appeal has weighed in on one of the hottest topics in UK employment law: the so-called gig economy and the concept of worker status.

Susannah Kintish and David Parsons, Mishcon de Reya LLP

What do a plumber, a minicab driver and a bike courier all have in common? According to a string of recent decisions, each of them is a worker and protected by UK employment law. In the most recent decision, the Court of Appeal has weighed in on one of the hottest topics in UK employment law: the so-called gig economy and the concept of worker status (Pimlico Plumbers and Mullins v Smith [2017] EWCA Civ 51).

Pimlico Plumbers follows hot on the heels of Aslam & Farrar v Uber BV & Others and Dewhurst v CitySprint UK Ltd (ET/2202550/2015, see News brief "Employment status and the gig economy: a drive for workers' rights ( www.practicallaw.com/5-636-2120) "; ET2202512/2016, see "Definition of worker: cycle courier" ( www.practicallaw.com/3-639-2868) , Bulletin, Employment law, this issue).

Employment status

The law recognises three categories of employment status. At one end of the spectrum are employees, that is, those who work under employment contracts and are subject to a substantial degree of control by their employer. Employees are entitled to the full extent of employment law protections and rights.

At the other end of the spectrum are the truly self-employed. These individuals, who by definition take on a substantial amount of risk in the way they choose to operate, are broadly not protected by any employment laws.

Somewhere in the middle lies a nebulous third category: the worker. Not quite an employee but not genuinely self-employed either, a worker is entitled to some, but not all, of the protections of UK employment law (see box "Definition of a worker").

Determining employment status is often a difficult and nuanced task. A number of tests have developed through case law but none are determinative and all need to be taken together. To make matters more complicated, the tests that have developed for employee and worker are now extremely similar. To varying degrees, both require personal service, mutuality of obligation (that is, the obligation on the employer to provide work and the obligation on the individual to accept that work) and the exercise by the employer of some degree of control.

To muddy the waters even further, HM Revenue & Customs has a completely different test for determining whether an individual is employed or self-employed for tax purposes, and does not recognise the concept of worker status at all.

Pimlico Plumbers

Between 2005 and 2011, Mr Smith was a so-called Pimlico Plumber. He was one of over one hundred skilled tradesmen engaged by Pimlico Plumbers (Pimlico) to provide plumbing and other services to its customers. Mr Smith was required to wear a Pimlico branded uniform, to rent a Pimlico branded van and to use a Pimlico mobile phone.

During their relationship, both Pimlico and Mr Smith were on the same page; Mr Smith was self-employed. He was responsible for providing his own materials for his work (some years he spent over £50,000 on materials), he decided when he wanted to work, what work he carried out and he took the relevant tax advantages of being self-employed, including a charge for the use of a room in his house as a home office and paying his wife for some secretarial duties.

In 2011, Mr Smith suffered a heart condition which meant that he was unable to work for a number of weeks. Subsequently, he informed Pimlico that he wished to work fewer hours. Pimlico requested that Mr Smith return his van and mobile phone, and ceased providing him with work.

Mr Smith brought a number of claims in the employment tribunal. As a preliminary issue, the tribunal was asked to determine Mr Smith's employment status. Mr Smith argued that he was an employee and therefore entitled to bring his claims, and Pimlico argued that he was self-employed and therefore not entitled to bring any of his claims. Both the employment tribunal and the Employment Appeal Tribunal found that Mr Smith was a worker, meaning that Mr Smith's claims for discrimination, holiday pay and unlawful deduction from wages could be heard (ET2374916/2011; UKEAT/0495/12/DM). Pimlico appealed.

Court of Appeal decision

There were two particularly noteworthy issues for the court to consider on appeal.

The first was whether Mr Smith had an obligation to perform work personally, and specifically whether he had the right to substitute his work (and if so, the extent of that right). There was no express right to substitute in any of the contractual documents between the parties. However, the employment tribunal had found that, in practice, Mr Smith was able to pass jobs on to other Pimlico operatives if he had more lucrative work elsewhere. Pimlico argued that this practice was inconsistent with an obligation to perform work personally. While the court accepted that this practice existed, it did not consider that it amounted to a contractual right but, rather, that it merely displayed a practice of informal concession on Pimlico's part and so did not negate the requirement for personal service.

The second noteworthy issue was whether Mr Smith had an obligation to make himself available to work for a minimum number of hours per week. If he did, he would not be in a relationship of business and customer with Pimlico, and could therefore fall within the worker definition. In this regard, the court was more prepared to adopt a purposive approach when considering the contractual documents. In Mr Smith's contract with Pimlico, there was an express term stating that there was no obligation on Pimlico to offer work and no obligation on Mr Smith to accept any work that was offered. There was also an entire agreement clause in that contract. However, Pimlico also had a working practices manual in place which stated that normal working hours were a minimum of 40 hours per week.

Faced with this conflict, the court looked at what it described as the realities of the situation. The court found that, although Mr Smith had not in fact worked for 40 hours per week, there was nevertheless an obligation on Mr Smith to be available to work and that the mutuality of obligation test was satisfied. Therefore, he was a worker and not a self-employed contractor.

A question of degree

This case was somewhat bizarre in that the reality of Pimlico's practices, as found by the employment tribunal, was often more indicative of self-employed status than the complicated contractual matrix that was found to govern the relationship. While the courts are quick to criticise lawyer-drafted documents that are unrepresentative of the realities of working practices, this decision is a reminder that the documents will always be a very persuasive starting point. Of course, those documents must be supported by actual working practices.

The decision also follows the trajectory of other recent gig economy cases and, arguably, goes one step further. Mr Smith was not a low-paid or unskilled worker. He was a highly paid and skilled tradesman with a relatively strong bargaining position in the market and benefitted immensely, financially and otherwise, from his self-employed status.

As with many gig economy cases, the court was quick to state that general principles should not be drawn from this decision. To coin an overused phrase, it is very much limited to its facts.

What is clear is that the tests to determine whether someone is a worker or an employee now seem to overlap significantly. More than ever, it now seems to be a question of degree. The court suggested that the employment tribunal had adopted the correct approach by asking the overarching question whether the better conclusion was that Pimlico was a client or customer of Mr Smith's business or whether Pimlico was better regarded as a principal, with Mr Smith an integral part of its operations. This seemingly gives tribunals and courts far more latitude to find employment or worker status when a strict application of the law might lead to a different conclusion.

Pimlico Plumbers certainly does not make the task facing businesses and their advisers in trying to determine employment status any less daunting or the outcomes any more certain.

Susannah Kintish is a managing associate, and David Parsons is an associate, at Mishcon de Reya LLP.

 

Definition of a worker

A worker is defined in section 230(3) of the Employment Rights Act 1996. To be a worker, an individual must:

  • Be in a contractual relationship with someone who gives them work to do; that is, the employer.

  • Promise to do or perform personally any work or services for the employer.

  • Not be in a relationship with the employer whereby the employer is essentially the client or customer of the individual's profession or business undertaking.


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