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Jun 2018

“Gig economy” update: Pimlico Plumbers lose appeal on worker status in the Supreme Court

Earlier this week, the Supreme Court handed down its long-awaited decision on worker status in the case of Pimlico Plumbers v Smith.  Coming at a time of continued interest in worker status issues in the so-called gig economy, unsurprisingly, the Court upheld the earlier decisions of the Employment Tribunal, Employment Appeal Tribunal and the Court of Appeal that Mr Smith (a Pimlico Plumber operative) was a “limb b worker” within the meaning of the Employment Rights Act 1996.

A limb b worker is an individual who enters into or works under a contract (which is not a contract of service) in which the individual undertakes to “perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.

In this highly fact-sensitive case, the Supreme Court considered two key questions on worker status – the first relating to the right of substitution and whether this means that an individual has agreed to perform the services personally, and the second relating to whether or not an individual is a client or customer of the other party.

Personal service

A substitution clause within a contract is a very useful indicator of self-employed status – provided, of course, it is used in practice.

The Supreme Court held that, whilst Mr Smith had a right to appoint a substitute to carry out his services, this right was highly restrictive - Mr Smith could only delegate his work to another Pimlico Plumber operative, who was subject to “an identical suite of heavy obligations”.  In the judge’s view, this meant that Mr Smith did not have an unfettered right to substitute at will and was therefore obliged to provide his services personally, satisfying the key element of the limb b worker definition above.

Traditionally, the courts have looked at the conditionality of substitution requirements (i.e. substitutes that must first be approved by the company) or the potential “sham” nature of substitution clauses in a contract.  However, the focus now appears to be shifting to the mechanism of substitution, how it works in practice, and the end result.

Client or customer

The Supreme Court judgment also fails to add clarity to the legal issue of whether an individual is a client or customer.  Instead, the Court fell back on the relevant facts of the case – i.e. Mr Smith wore a branded uniform, drove a branded van, carried an identity card and followed instructions from the company’s control room.  His contract included references to ‘wages’, ‘gross misconduct’ and ‘dismissal’ and had a suite of post-termination restrictions (terms one would only expect to find in an employment contract).  It was for these reasons that it was held that the Tribunal had been entitled to conclude that Mr Smith was a limb b worker.

Worker status

The decision that Mr Smith was a limb b worker within the meaning of the Employment Rights Act 1996 also means that he is a worker for the purposes of the Working Time Regulations 1998 (which govern, amongst other things, holiday pay entitlements) and “in employment” for the purposes of the Equality Act 2010.

Whilst an unsurprising result, the judgment adds very little to the existing case law on the meaning of ‘worker’ and fails to provide much-needed clarity on the legal tests applied in this area.  Of course, it is unlikely to be the last judgment of its type and so we look forward to the next…

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