The question on this appeal is whether the Employment Tribunal (“the ET”) was correct to hold in a decision dated 16 April 2012 that the respondent, Gary Smith, was a worker within the meaning of S.230(3)(b) of the Employment Rights Act 1996 (“the ERA”) and regulation 2(1) of the Working Time Regulations 1998 (“the WTR”) and his working situation fell within the definition of “employment” in S.83(2)(a) of the Equality Act 2010 (“the EA”) during the period that he worked for Pimlico Plumbers Limited (“PP”).
As put by the Master of the Rolls in this Court of Appeal case, "The case puts a spotlight on a business model under which operatives are intended to appear to clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker."
The claimant worked as a plumber for PP from 2015 to 2011 until he had a heart attack. His 2005 contractual agreement described Mr Smith as the "sub contracted employee". PP's Manual said, "...you should complete a minimum of 40 hours" and "The Company logo’ed uniform must always be clean and worn at all times." All customer contact, appointments and scheduling had to be made through the control room.
The Manual provided that mobile telephone charges plus VAT "will be deducted from wages on a monthly basis". Under the heading of 'Private Work' it stated that "Any individual undertaking private work for or as a result of contacts gained during your working week and contravening the signed contract will be dismissed immediately and may be subject to legal action by the Company... Any Operative using information gained while working for the Company for anything other than the Company’s benefit will be prosecuted."
Further, the Manual referred to the 'Termination of Contract' and stated that, "Operatives who fail to observe the rules outlined in this working practice manual in respect of procedures or conduct, will be given a warning and may thereafter be subject to instant dismissal. Wherever possible the Company will give reasonable notice of termination of contract. Operatives are required to give reasonable notice of leaving and complete the following formalities: ..." Plumbers had to use vans with PP's logos.
A 2009 agreement was more detailed and had more references to requirements similar to those found in self-employment agreements e.g.
" For the avoidance of doubt, the Company shall be under no obligation to offer you work and you shall be under no obligation to accept such work from the Company."
"... you shall be paid a fee in respect of the Services equal to 50 per cent of the cost charged by the Company to the client in relation to labour content only, provided that the Company shall have received clear funds from the client, and there are no outstanding complaints relating to the Services performed by you."
"Your fees will be paid by the Company only against receipt of your invoice (showing VAT separately, if applicable). Invoices should be submitted weekly in arrears and will be paid once the Company has
received cleared funds from the relevant client. If an invoice remains unpaid for more than one month, the fee payable to you will be reduced by 50 per cent. If an invoice remains unpaid for more than six months, you will not receive a fee for the work."
"... you will account for your income tax, value added tax and social security contributions to the appropriate authorities."
Notwithstanding these clauses, the EAT concluded at the first appeal that it considered that the ET was entitled to find that the extent of the restrictive covenants limiting Mr Smith’s right to work were also inconsistent with Mr Smith being in a business on his own account.
The Court of Appeal was also critical of the use of restrictive covenants. It found that, in particular, in particular, the ET was entitled and right to place weight on the onerous restrictive covenants in subparagraph 4.4, which, on the face of it, included a covenant in sub-paragraph 4.4.1 precluding Mr Smith from working as a plumber in any part of Greater London for three months after the termination of the 2009 Agreement.
Mr Smith was not an employee under the ERA 1996 (the GB equivalent of the Employment Rights (NI) Order 1996) - to some extent he could make his own work arrangements and take advantage of tax breaks associated with self-employment. Mr Smith’s income and expenditure accounts demonstrate that he had to cover substantial costs of materials himself. In the last full year he worked for PP he paid £52,887 on materials. He also provided his own protective clothing. He paid his wife £4,680 per year for minimal secretarial duties and also claimed a sum of £520 per year to reflect the use of a room in his home as his office. He also set off sums for accountancy charges, insurance, telephone and internet, tools and equipment hire and motor vehicle expenses. Against receipts of £130,753 Mr Smith set off expenses totalling £82,454.
The employment tribunal found that although Mr Smith had autonomy in relation to the estimates and work done, PP exercised very tight control in most other respects. Taken in the round, the tribunal was held to have been correct in concluding that Mr Smith was a 'worker' within the meaning of S.230(3)(b) of the Employment Rights Act 1996 and the Working Time Regulations 1998 and an 'employee' under the extended definition of that term in S.83(2) of the Equality Act 2010.
https://www.judiciary.gov.uk/wp-content/uploads/2017/02/pimlico-plumbers-v-smith.pdf
The Equality and Human Rights Commission in GB was very happy with the outcome, having funded the claimant's case:
https://www.equalityhumanrights.com/en/our-work/news/pimlico-plumbers-v-smith-appeal-judgment-will-help-workers-gig-economy
Continue reading
We help hundreds of people like you understand how the latest changes in employment law impact your business.
Please log in to view the full article.
What you'll get:
- Help understand the ramifications of each important case from NI, GB and Europe
- Ensure your organisation's policies and procedures are fully compliant with NI law
- 24/7 access to all the content in the Legal Island Vault for research case law and HR issues
- Receive free preliminary advice on workplace issues from the employment team
Already a subscriber? Log in now or start a free trial