A plumber has won the latest round in a long running legal battle for working rights in a Supreme Court ruling issued today, but will it have huge ramifications?
The case, involving Pimlico Plumbers and one of its contractors, is not about whether the plumber, Gary Smith, was employed or self-employed for income tax purposes but whether he was a worker or self-employed for employment law purposes. As he has been ruled to be a worker, he’s entitled to all the rights of an employee apart from paternity/maternity leave, the right not to be unfairly dismissed, redundancy pay and statutory sick pay.
Gary Smith had worked solely for Pimlico Plumbers for six years. His battle began when he wanted to reduce his hours following a heart attack in 2010. The firm refused his request and took away his branded van, which he had hired. He claims he was dismissed.
Despite being VAT-registered and paying self-employed tax, the Courts had previously ruled that he was not self-employed but was a worker entitled to certain workers' rights. The Supreme Court agreed with and upheld these earlier court decisions.
The decision is not being considered to be a game changer as, while there are similarities with other cases, each case is decided on its own fact patterns and circumstances. Companies have different ways of working, different contracts and different ways in which they manage their contractors.
The facts in this case were very specific. What swung it for Mr Smith were the terms on which he was engaged enabled Pimlico Plumbers to exercise tight administrative control over him during his periods of work for them.
The judgment acknowledged that some aspects of Smith’s conditions resembled self-employment, such as the entitlement to refuse work and being responsible for dealing with faults and bad debts, but other aspects didn’t, including the requirement for him to wear a branded uniform and have a tracker in his branded van. His contract also made reference to “gross misconduct” and “dismissal”.
The government continues to look at this area and has previously stated its support for last year's Taylor Review into working practices, which concluded that all work in the UK's economy should be "fair and decent" and that people who work for platform-based companies, such as Deliveroo and Uber, should be classed as dependent workers with appropriate rights.
The report also proposed changes including stricter enforcement of holiday and sick pay rights, and higher fines for firms that breach contracts or mistreat staff and is the subject of consultation with a view to updating employment legislation in this area.
For businesses concerned that their current arrangements may be impacted by this latest ruling, we advise them not to panic. No new principles of law around worker status have been established by this case. However, any employer which has been engaging contractors on a self-employed basis where those contractors have been working regularly or exclusively for them over a long period may well have issues to address, unless the contractor is genuinely allowed to send a substitute of their own choosing whenever they think the need arises.
Companies need to review their existing arrangements as a matter of urgency (not because of today’s ruling, this has been the case for some time) to see what exposure they might have to claims for sick pay, maternity/paternity pay, the national minimum wage and the like.
Other companies engaging contractors should be looking at their arrangements with their contractors just to ensure they definitely justify a ruling of self-employment for employment law purposes in each case. Although today’s ruling is not about employment income tax, they should also review those same contractual arrangements to ensure a ruling of self-employment is appropriate for income tax purposes too. The review could be extended to consider ‘indirect’ engagements (where the engager engages the worker via their own personal service company) which may be impacted by the IR35 rules. These are very likely to be rolled out to the private sector following the Government’s publication of a consultation paper in May.