Following a recent high profile Court case, partner Andrew Bryan poses the Question “When is a worker an employee rather than a self-employed contractor?”
This is an important distinction, for both the organisation and the individual, and has significant implications for both tax and the employment rights of the individual. Andrew says, “The definition of a worker as employed or self- employed is not a matter of choice or convenience but is of necessity a matter of law”.
In a Supreme Court judgement in June of this year, it was ruled that an employment tribunal was entitled to conclude that a plumber (Mr Smith) who had worked for a company (Pimlico Plumbers), which exerted a substantial measure of control over its operatives while declaring that they were self-employed in business on their own account, had been an “employed worker” who could complain about unlawful deduction of wages, failure to provide holiday pay and disability discrimination.
In reaching their decision, the judges noted that, on the one hand, Pimlico Plumbers wanted to present its operatives to the public as part of its workforce (driving liveried vans, for example, wearing a company uniform and holding a company identity card) but that, on the other hand, it wanted to render them self-employed in business on their own account for purposes of employment and tax; and that the contractual documents had been “carefully choreographed” to serve those inconsistent objectives. But the judges also proceeded to identify a third objective, linked to the first, namely to enable Pimlico Plumbers to exert a substantial measure of control over the working hours and conditions of its operatives; and that had clearly made development of the choreography even more of a challenge.
In support of its contention that it was a client of Mr Smith, Pimlico made four main points:
(a) Without prejudice to his overall obligation to make himself available to accept work, if offered, for up to 40 hours each week, Mr Smith was entitled to reject any particular offer of work;
(b) Mr Smith was free to take outside work albeit not if offered by Pimlico’s clients;
(c) Pimlico reserved no right to supervise, or otherwise interfere with, the manner in which Mr Smith did his work; and
(d) There were financial risks, as well as advantages, consequent upon Mr Smith’s work for Pimlico.
The severe terms as to when and how much it was obliged to pay him, however, betrayed a grip on his economy and his working environment that was inconsistent with his being a truly independent contractor. The contract made references, for example, to “wages”, “gross misconduct” and “dismissal”.
On the evidence before it, the Court concluded that Pimlico could not be regarded as a client or customer of Mr Smith. Accordingly, the substantive claims of Mr Smith as an employee could proceed to be heard in the employment tribunal.
If you would like assistance in relation to an employment matter, call Andrew Bryan on 023 9282 0747 for further information.
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