Author: Jamie Meechan, Trainee Solicitor
Most of us know the difference between being employed and being self-employed (or at least we think we do). And in everyday laymen's terms, the difference is relatively straightforward and obvious – if you are employed, you work for someone else and, if you are self-employed, you 'work for yourself'. But in the eyes of the law, the distinction is not always so straightforward, particularly because of a third category of 'employment status' – workers.
As the Office of Tax Simplification explained in their March 2015 Employment Status report, "employment status is a complex and wide-ranging subject that many have said has no real solution – and that if we did manage to 'solve it', we should immediately move on to world peace as we'd clearly be on a roll."
On Friday (10 February 2017), the Court of Appeal handed down its judgment on this very issue, in the case of Pimlico Plumbers v Smith. Confirming the decision of the Employment Tribunal and Employment Appeal Tribunal, the Court of Appeal went beyond the strict terms of the contract between the parties, and decided that the plumbers engaged by Pimlico were in fact workers and not self-employed.
A full copy of the judgment can be found here.
It was noted in the judgment that this was a case of 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 [the operatives are] independent contractors" rather than employees or workers. The Court of Appeal have therefore found a leak in the contracts between Pimlico and its plumbers, and held that in practice, these individuals are workers.
This distinction is important because, unlike self-employed contractors, workers are entitled to employment rights such as the national minimum wage and holiday pay.
With the Court of Appeal's decision, there is now a growing body of case law on this topic. In fact, one of the first notable employment decisions of 2017 came when the Employment Tribunal found that a City Sprint bicycle courier was a worker and not self-employed, and was therefore entitled to holiday pay and other wider protections not afforded to the self-employed.
The employment tribunal's decision in the Uber case at the end of last year has also been well documented. Despite signing a contract clearly intended to create a self-employment relationship, the tribunal looked at the relationship in practice and found that the drivers were in fact 'workers'. See our earlier update here.
So as the meter continues to run with the Uber case (with an appeal to the EAT), and as employers arguing couriers in the City Sprint case were self-employed are told to get on their bike, the decision from the Pimlico Plumbers case suggests that the issue of employment status will remain in the employment law and HR pipeline for the foreseeable future. Employers and 'employees' alike should be clear about the nature of the relationship between the parties and should take advice where appropriate.
Employment status remains firmly on the agenda for 2017, and world peace may have to wait for now. Businesses should therefore:
- Ensure contracts are well drafted and robust; and
- Ensure that the relationship in practice is not materially different from the relationship on paper. With each case turning on its own facts, and a growing body of decisions finding in favour of the 'worker', it is more important than ever to take advice.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
