There was widespread coverage last week of the decision of the Supreme Court upholding an Employment Tribunal’s judgment that a Pimlico Plumber was a “worker” entitled to bring claims against the company for discrimination, holiday pay and deductions from wages. Pimlico Plumbers’ CEO Charlie Mullins has been vocal in his opposition to the judgment, and what he says is a failure of employment law to recognise modern working practices. Much of the commentary focused on the effects on the so-called “gig economy”. But what did the Supreme Court decide, and what does this mean for self-employed contractors?
Employment lawyers reading the Supreme Court’s judgment will find nothing new: the case hit the headlines largely because of the high profile of the appellant, and because the Supreme Court isn’t often asked to determine employment disputes of this nature. Whilst some hoped for a landmark judgment, the case was largely determined by reference to the particular facts in question – the relationship between Mr Smith and Pimlico Plumbers, the wording of the contract and what happened in reality.
But the case does serve as a reminder of a number of key points that should always be taken into account when engaging self-employed contractors:
- It is perfectly proper and possible for a person to be self-employed for tax purposes but also be a “worker” with rights to holiday pay, statutory sick pay, and pension contributions and to bring claims under the Equality Act.
- Where a company wants to present self-employed contractors to their clients as if they are part and parcel of the company, this can result in confusion over their status.
- A high level of control over the self-employed person is more likely to result in them being a “worker”.
- Whilst a genuine right of substitution can mean that a person is not a “worker”, a limited right to swap jobs with others engaged by the same company does not.
- Although Tribunals will look behind contractual terms to the reality of the situation, getting the contract right can be crucial: Pimlico Plumbers had great difficulty with their assertion that Mr Smith had a right of substitution because this was not covered in his contract with them and because the contract focused on him personally, referring “your skills” and “your appearance” amongst other things.
As the Supreme Court recognised, there can be a conflict in presenting self-employed contractors to clients as an integral part of the organisation whilst maintaining that they are genuinely self-employed without the status of “workers”. If there is a need for personal service (or to limit the extent of substitution) and to control what the contractor does and how they do it, it will be difficult to argue that the contractor is not a “worker”.
“Worker” status gives self-employed contractors several rights, the most immediate of which will be to receive paid holiday and to be auto enrolled into a pension scheme with employer contributions (unless they opt out). With the European Court recently giving judgment that holiday pay can be claimed back to the beginning of an engagement rather than simply the current year, getting it wrong could prove to be very expensive.
Instead, if there is a need for a high level of control and for work to be done personally, it is better to reflect the obligation to pay holiday and make pension contributions (as well as the risks of claims arising from other responsibilities) in the overall bargain made with the contractor. The day rate or other agreed remuneration should take into account these obligations.
Conversely, where substitution is possible and where the contractor can be left to their own devices, care should be taken so that contracts are drafted to reflect reality: if there is no need for personal service, references to the individual contractor’s obligations should be avoided.
If you engage or plan to engage self-employed contractors, Louise Taft can discuss your needs with you to assess the likely status that would be assigned in your circumstances. She can also advise on the contractual terms to be offered to best protect the business against claims of employee or worker status. Contact Louise on 020 7935 3522 or email@example.com
Whatever your personal circumstances the above is only a guide and we would advise you to contact us to obtain definitive advice as you will appreciate that each person’s circumstances are unique to them.