Self-employed plumber found to be a worker by the Court of Appeal

Self-employed plumber found to be a worker by the

Following the recent trend of 'gig economy' cases, in Pimlico Plumbers Limited and Another v Smith, the Court of Appeal has held Mr Smith was a worker.

1000

Also on KPMG.com

Following the recent trend of 'gig economy' cases, in Pimlico Plumbers Limited and Another v Smith, the Court of Appeal has held that despite being self-employed for tax purposes, the Respondent, Mr Smith was a worker and his working situation fell within the definition of ‘employment’ in the Equality Act 2010 (the EA) during the period that he worked for Pimlico Plumbers Limited (Pimlico Plumbers). This entitled Mr Smith to bring claims in respect of discrimination, holiday pay and arrears of pay.

Mr Smith, a plumber, entered into an agreement with Pimlico Plumbers. He accounted for his own income tax, VAT and social security contributions as if he was self-employed, and provided all his own tools, equipment and materials for performance of the work. Mr Smith could reject particular jobs and Pimlico Plumbers had no obligation to provide him with work.

When Pimlico Plumbers terminated Mr Smith’s agreement he brought claims for unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, arrears of pay, direct disability discrimination, discrimination arising from disability and failure to make reasonable adjustments, which, as a self-employed individual, he was not entitled to bring.

At first instance it was held that Mr Smith was not an ‘employee’. However, it was held that Mr Smith was a ‘worker’, in particular, because:

  • Mr Smith was required to provide work for Pimlico Plumbers personally. There was no 'unfettered' right to provide a substitute (only job-sharing or shift swapping was allowed); and
  • Pimlico Plumbers couldn't be considered to be a client or customer of Mr Smith's business but was better regarded as principal. 

This meant he was entitled to bring claims of direct disability discrimination, discrimination by reason of failure to make reasonable adjustment and holiday pay.

Pimlico Plumber's appeal to the Employment Appeal Tribunal was dismissed, so they brought a further appeal in the Court of Appeal.

The Court of Appeal agreed that Mr Smith was a worker and stated that this case "puts a spotlight on 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, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker".

The key points to take away are that:

  • while certain factors will point away from employee status, other factors will point towards worker status e.g.:
    • onerous restrictive covenants adversely impacting on an individual’s ability to work privately or for other companies;
    • personal service and no ‘unfettered’ right to provide a substitute;
    • minimum working hours required; and
    • the company exerting such a level of control over the individual that they cannot be regarded as their customer or client
  • there can be a difference between an individual’s employment law and tax status (although one is likely to be a factor in assessing the other); and
  • it is important to ensure that the contractual documentation reflects the reality of the relationship between the parties.

If you have any questions then please do get in touch with your usual KPMG contact.

 

For further information please contact :

Donna Sharp 

Dorothée Giret

Tax Matters Digest

View KPMG's weekly newsletter covering the latest issues in taxation and government announcements relating to tax matters.

 
Read more

Connect with us

 

Request for proposal

 

Submit

KPMG’s new-look website

KPMG has launched a state of the art digital platform that enhances your experience and provides improved access to our content and our people, whatever device you are on.

 
Read more