We’ve been watching the
employment law case involving London-based Pimlico Plumbers with great
interest.
Now before the Supreme Court,
the case centres on the claim by Gary Smith, an engineer, that he was a
‘worker’ at the plumbing giant (affording him greater employment law
protection).
Pimlico argues that Mr Smith was
a self-employed contractor and they owed him few legal obligations.
It’s a case that could have
widespread ramifications for the way we interpret employment contracts in
future. It also demonstrates the different rights and obligations that arise
depending on the nature of an individual’s employment with a particular
company.
Last year the Court of Appeal
decided Mr Smith was indeed a worker. It relied on the fact that he had to work
a certain number of hours each week for Pimlico Plumbers. He also had to use a
Pimlico Plumber branded vehicle when working for the company.
If the Supreme Court confirms
his designation as a worker, Mr Smith could potentially bring claims against
Pimlico Plumbers under disability laws and seek holiday pay.
GREATER PROTECTION FOR GIG
ECONOMY WORKERS?
If Pimlico Plumber’s appeal does
ultimately fail the result could bolster the rights of the huge number of
British workers now working in the so-called ‘gig economy’ on freelance or
short-term contracts. (It’s estimated that there are about a million people
working in the gig economy in Britain in sectors ranging from legal and
accountancy services to manual work, cleaning services and courier services.)
Because of the potential impact
on gig economy workers some say the case is hugely significant. Others are not
so sure saying Mr Smith’s employment status at Pimlico was so unique that the
case will actually have little effect beyond the case itself.
UNPICKING SHAM CONTRACTS
Whatever way the Pimlico Plumber
case unfolds we believe there is a trend by the courts to unpick what are
sometimes described as ‘sham contracts’. More and more the courts prepared to:
·
examine
the reality of working relationships
·
look
beyond the wording of any legal agreement between businesses and individuals
when assessing employment status
·
decide
on and give effect to the precise nature of the agreement between the parties
We have already seen this
approach by the Employment Appeal Tribunal in a case brought by drivers working
for the cab-hailing app Uber. The tribunal ruled that Uber drivers were
in fact ‘worker’s, finding that the relevant employment paperwork did not
reflect the true working relationship between Uber and its drivers. The court
even described the idea that Uber effectively amounted to 30,000 small
businesses across London as ‘faintly ridiculous’. Uber is appealing the
judgment.
THE GOVERNMENT’S GOOD WORK PLAN
The government too looks set to
address the fluctuating nature of the modern workplace. Just this month it has
launched its ‘Good Work plan’
, which aims to:
·
enforce
vulnerable workers’ holiday and sick pay for the first time
·
introduce
a list of day-one rights including holiday and sick pay entitlements and a new
right to a payslip for all workers, including casual and zero-hour workers
·
allow
all workers to request a more stable contract, providing more financial
security for those on flexible contracts
The Institute of Directors has
described the initiative as possibly ‘the biggest shake-up of employment law in
generations”. While protecting vulnerable workers is a worthwhile aim, it’s
important that the changes do not result in increased red tape for employers
already burdened with a vast amount of employment law regulation.
DEFINING EMPLOYMENT STATUS
There are three types of employment
status:
·
Employee
·
Worker
·
Self
employed
Each category has different
employment rights with employees the most robustly protected and self employed
virtually no protections.
When advising businesses on the
contractual arrangements they have with individuals there are certain key
questions our employment lawyers ask to decide whether someone is a
worker, employed or self employed. These include:
·
Can
the individual work for a number of employers at the same time?
·
Can
the employer appoint or dismiss the individual?
·
Is
there some kind of mutual obligation (for the company to provide work and the
individual to perform it)?
·
Can
the individual get someone else to perform the work (substitution)?
·
What
are the tax implications of the work?
CHECK YOUR CONTRACTS NOW: YOU
COULD FACE HEFTY TAX BILLS
With the shift in approach to
employment contracts by courts and government it’s now essential for companies
who employ contractors or short term workers to review their contracts and
ensure they will stand up to scrutiny.
Just because you have an
agreement with a freelancer or contractor that is described in a particular way
does not mean it will be viewed as such if questioned. More and more it is essential
to examine the reality of the worker/employer relationship to see whether it is
more akin to a worker or employee agreement.
There is a real danger that if
your arrangements with those who do work for your company do not reflect
reality and instead are deemed to be ‘sham contracts’ you will face
considerable back tax bills and fines. Remember, courts are now prepared to
look beyond written arrangements.
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