Credit Management magazine May2017

HR MATTERS
THE STATUS
OF WORKERS
Gareth Edwards explores what status an employee has depending
on his contract and what rules he is subject to.
BUSINESSES using the services of self-employed
consultants may need to question whether they
need to change their working model following
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
Smith's services including that he had to wear company
uniform at all times; his normal working hours were a
five-day week in which he should complete a minimum of
40 hours; he must always be available during his shift to
take on-call work; and there were detailed requirements
for timesheets, invoices, estimates and additional labour
charges.
This contract was replaced by a more detailed
agreement in September 2009, which referred to Smith
as a ‘self-employed operative’. This stated that the actual
days he provided his services would be agreed from
time to time; he had to correct any errors free of charge
or cover the cost of correcting them; his fee would be
paid against his invoices and set at 50 percent of the
cost charged by the company; he was responsible for
his own taxes and had to provide his own equipment
and materials; and had to follow ten ‘personal conduct’
guidelines.
In practice, 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, Smith brought claims against
Pimlico Plumbers for unfair and wrongful dismissal
and against its Managing Director, Charlie Mullins, for
disability discrimination.
After consideration, the Employment Tribunal held
that Smith was not an employee for unfair dismissal
purposes because there was no legal obligation on
Pimlico Plumbers to provide him with work. The judge
also felt 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.
The judge did, however, hold that Smith was ‘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 (and not substitute someone
else) 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 Employment Appeals Tribunal 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.
The case went to the Court of Appeal as Mullins and
Pimlico Plumbers appealed the decisions on worker
status and being in employment for discrimination
purposes. However, their appeals were unsuccessful.
The Court of Appeal conducted a thorough review
and offered comments on the right of substitution. It
held that Smith had a personal obligation to provide his
services. It also held that he 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).
Gareth Edwards is a partner in the employment team
at Veale Wasbrough Vizards. gedwards@vwv.co.uk.
48 May 2017 www.cicm.com
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