Pimlico Plumbers Limited and (Another) v Gary Smith

The Supreme Court published its decision in the case of Pimlico Plumbers v Smith last week. The Supreme Court agreed with the Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal that the test for worker status had been satisfied and that Mr Smith was a worker.

Whilst this case made the headlines for many reasons, clients should remember that the judgement was based on its own facts and the application of law to those facts. There are other cases that deal with the ‘Gig economy’ that are going through the courts too. Not only that, but there is Government consultation underway that aims to look to clarify and avoid many issues that this case deals with in the future.

The test for worker status is set out in section 230(3)(b) of the Employment Rights Act 1996. It is a two-part test, and a claimant must meet both parts for the courts to classify them as a worker.

The two-part test is

  • Does the individual have to undertake the work personally?
  • Was the other party to the contract a client or customer?

1.    Personal work

The Supreme Court found that whilst Mr Smith had the right to send a substitute to carry out a job, that substitute had to be under contract with the Company. Therefore, the dominant feature of his contract was an obligation of personal performance.

2.    Not a client or customer

Here the issue for the Supreme Court to decide was whether Mr Smith was marketing his services to the world or whether he was an integral part of the Company. They found that whilst Mr Smith had some operational and financial independence, the Company marketed his services, and he was subject to the Company’s controls (including uniform, van and ID card and the Company’s administrative controls and payment terms) and as such the Company was not a client or a customer.

As Mr Smith met both parts of the test, this meant that he was a worker and therefore had the relevant employment rights.  Mr Smith’s claims for disability discrimination, holiday pay and unlawful deductions from wages will now go back to the employment tribunal for it to decide on those claims.

The point that many people focus on is that Mr Smith registered himself as self-employed for tax purposes. As such how can he be a ‘worker’ and have some employment rights, if he is self-employed for tax purposes?

He had the tax advantages of the HMRC treating him as self-employed but now has employment rights as well. This smacks of having your cake and eating it.

There is a potential mis-match between the varying types of status in employment law (employed, worker and self-employed) and the different types of status in relation to tax (employed and self-employed). This inconsistency and confusion is part of the Government’s current consultation and the employment status recommendations made in the recent Taylor Review.

For advice on this, and other HR / Employment Law concerns, please contact AHR Consultants on 0345 076 2288 or complete an enquiry form.