Co-authored by Richard Harvey, GQ Employment Law
The gig economy is expanding fast.1 Although it brings great benefits, such as flexibility for companies and individuals, it also has generated concerns regarding workplace protections and social inequalities. In the UK, the legal framework for these concerns has been developed through recent high-profile claims from individuals working in the gig economy. These cases have all turned on the individuals' employment status under UK law. On February 10, 2017, in Pimlico Plumbers v. Smith  EWCA Civ 51, the Court of Appeal reconsidered the two-pronged test to determine whether an individual is a worker, for purposes of the statutory protections afforded workers under the law.
In Pimlico Plumbers, the claimant was a plumber who carried out work on a job-by-job or "gig" basis for Pimlico Plumbers, receiving a proportion of the fee charged to the end client. The claimant was fired following a heart attack and initially tried to assert he was an employee, claiming he had had been unfairly dismissed. When this employee status claim was rejected, the claimant asserted that he nonetheless was a worker due to the nature and extent of the control the company exerted over his work.
In the UK, there are three relevant categories of status (i.e., employees, workers, and independent contractors) and the statutory protections afforded the individuals are determined by their status. To be considered a worker under the law, an individual must show that he or she is obliged to perform the work personally, and that the business for which the work is done is not a client or customer of the business carried on by the individual.2
In Pimlico Plumbers v Smith, the Court of Appeal focused on two sets of facts. First, the claimant was able to ask other individuals to help him carry out the tasks. Second, the claimant was required to be available to work a minimum number of hours per week, had to comply with certain standards of conduct and appearance, and was subject to onerous restrictive covenants.
As to the first prong of the test, the Court of Appeal found that because the right of substitution was not unfettered, the claimant had an obligation to perform the work personally. As such, the requirement for personal service was satisfied. As for the second prong of the test, the claimant was closely entwined in the Pimlico Plumber business, working in a subordinate position to the company, such that it could not be said that Pimlico Plumbers was the claimant's client. Therefore, the second part of the worker status test was also satisfied. Accordingly, the Court of Appeal found that the claimant was a worker and not an independent contractor.
Recommendations for UK Employers
Care needs to be taken in each case to distinguish whether an individual is an employee, worker or an independent contractor. Unlike independent contractors, workers in the UK are entitled to various statutory rights, including the right to holiday pay, to receive the national minimum wage and to not suffer discriminatory treatment.
This case is of particular interest as it is one of several high-profile cases relating to individuals working in gig economy roles. So far, each of these cases has held the individuals to be workers. However, although the Court of Appeal's decision in this case is binding on all courts in England and Wales below it, the decision is very fact-specific. Thus, considerable ambiguity remains regarding employment status in the UK. There are also wider social and economic factors at play, which have ignited the public interest in these cases and the gig economy as a whole.
For these reasons, the UK government has commissioned a review into modern workplace practices expected to be published as a report later this year. Particularly in light of the growing number of individuals in gig roles, this report is likely to have a significant impact on UK employment law over the next year or so.
Businesses that rely on gig staff should be aware that, under UK law, it is increasingly difficult to engage truly independent contractors who do not have worker rights. The contractual relationship with individuals must be very carefully structured to maintain the independent contractor status of the individual, or an employer may want to accept the worker status of the individual, and allow for the extra costs of engaging workers (which may, then, be passed on to the workers in reduced hourly rates or to the customers in higher prices).
1. The "gig economy" has been referred to as the shift from traditional work arrangements (requiring full-time employees) to contingent or alternative work arrangements for skill project work, performed by a contingent workforce (including independent contractors, freelancers, consultants, etc.). Some studies suggest that, since 2008, about 40% of new jobs fell in the gig economy category in the UK, with technology, healthcare, education, construction and professional and business services as the primary industries driving its surge.
2. The question of employment status in the UK has been blurred in recent years by the evolution of the "worker" status, a creature created by statute. A worker is defined under section 230(3) of the Employment Rights Act 1996 as "an individual who has entered into or works under (or, where the employment has ceased, worked under):
- A contract of employment; or
- Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual."
Co-author Richard Harvey is a Partner with GQ Employment Law.
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