A series of recent high-profile cases (involving Uber, Deliveroo and most recently Pimlico Plumbers) are causing some businesses using the services of self-employed contractors to question whether they need to change their working model.
The latest case, involving family business Pimlico Plumbers, made headline news in February.
The Facts
Mr Smith was referred to as a "self-employed operative" in his contract with Pimlico Plumbers. His contract also included various terms about how he should provide his service as a plumber, including that he was responsible for his own taxes and had to provide his own equipment and materials.
Mr Smith decided his own working hours, and Pimlico Plumbers had no obligation to provide work on any particular day. He had discretion whether to negotiate on price, he covered substantial costs of materials himself and he provided his own protective clothing.
When Mr Smith's contract was brought to an end by Pimlico Plumbers following a heart attack that he suffered in January 2011, the court was tasked with determining whether he was genuinely a self-employed contractor, or whether he was a 'worker' (with the limited employment rights that go with that status).
Despite some of the provisions in his contract (and some of the working practices) having been designed to try to secure self-employed status, the court determined that Mr Smith was indeed a worker, and was not self-employed. As such, he enjoyed certain employment rights which Pimlico Plumbers had tried, through the structure of the arrangement, to avoid.
Best Practice
Despite the series of recent cases in which individuals have been found 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.
We appreciate that the self-employed contractor model can be particularly attractive for family businesses, especially in the early days when your business is just starting to grow. Care must be taken, however, to ensure that the individuals providing the services genuinely meet all of the necessary criteria (such as exercising a genuine right of substitution).
If your family business uses self-employed contractors, you should review not only your written agreements with contractors, but also their working practices around aspects like substitute workers, and how much control your business has over how the contractor provides their services. The recent case law is making it more clear than ever that the courts will pay attention to 'substance' of the relationship, as well as the form which it takes in the contract.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
