Appeal Court rules against employers’ fiction that their workers are self-employed
A ruling by the Court of Appeal against Pimlico Plumbers has signalled a significant change in the way freelancing works in the workplace. It dismissed the appeal by the Lambeth-based company and upheld the ruling made by the Employment Tribunal that plumber Gary Smith was a “worker” rather than an employee.
This means he should be afforded workers’ rights such as sick pay, access to the national minimum wage, holidays and the ability to bring discrimination claims.
Mr Smith, from Kent, claimed he had been dismissed when he asked to cut his five-day week, which had been signed up to work with the firm, to three after he suffered a heart attack.
He was treated as self-employed for tax and VAT purposes and had some flexibility over his hours but had worked solely for Pimlico Plumbers for six years.
However, the Tribunal ruling found that measures laid out in an employment agreement between Smith and Pimlico Plumbers, originally in 2005 and then in an updated version in 2009, indicated that he was a worker.
Mr Smith’s solicitor, Jacqueline McGuigan, said the case would lead to greater clarification with regards to similar models used in the modern workplace. She described the decision as “huge” and a “resounding victory” for her client who, she argued, was “tightly controlled” by Pimlico Plumbers in the sense that he couldn’t work for anyone else.
Charlie Mullins, the CEO of Pimlico Plumbers, agreed that the ruling has provided more clarity and that he has since updated the contracts used by his firm. “Like our plumbing, now our contracts are watertight,” he said.
He added that he harboured no ill-feeling towards Mr Smith and that he wished him well. However, he explained how, although he would need to confer with his lawyers, it was likely that he would take the case to the Supreme Court. He said: “Gary Smith was a self-employed contractor carrying out work for Pimlico Plumbers for about six years, and during that time was very happy to take advantage of all the tax benefits of being self-employed, including being VAT registered, paying low corporation tax rate on his earnings, and claiming tax relief on such things as office space and employing his wife.
“Mr Smith was also not paying tax on a PAYE basis at 45p in the pound, which is one of the major features of the ‘worker’ status. “As [an organisation] Pimlico Plumbers was very unhappy with the judgement handed down by the Court of Appeal, and is studying the judgement, with a view to appealing the decision to the Supreme Court.”
Mr Mullins explained that there were several financial advantages to adopting the self-employed route rather than working on a PAYE basis. He told City A.M. that if his company had to change the way it hires people, it would be wages which would decrease rather than increase the prices. “The plumbers would be paid less,” he said.
“The prices wouldn’t change, but the wages would.
“At the end of the day we will offer people whatever works for them – we just want to get people in to work.”
The case is likely to attract interest from parties adopting and working within a similar model to the one used at Pimlico Plumbers. It is the latest instalment to the situation surrounding workers’ rights in the “gig” economy, which has seen an expert panel assembled by the Government.
Led by Matthew Taylor, Chief Executive of the Royal Society for the Arts, it is looking at pensions, job security, holiday and parental leave rights as well as “employer freedoms and obligations”.
However, Lord Justice Underhill, one of the judges who presided over the Pimlico Plumbers case in the Court of Appeal, warned that it should not be taken as a definitive example.
“Although employment lawyers will inevitably be interested in this case – the question of when a relationship is genuinely casual being a very live one at present – they should be careful about trying to draw any very general conclusions from it,” he said.