Neil Buck: Is employment status a problem for employers?

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In law there are currently three types of status: self-employed, worker and employee, each with different rights and entitlements.

In the last few months, there have been three well publicised cases regarding employment status which highlights how some businesses are being taken to task over the way they are using their people in reality, regardless of what the contract between them stated.

Uber, CitySprint and the latest this month being Pimlico Plumbers, have all been challenged as the people bringing the cases felt they were not receiving the rights and benefits they should be as ‘workers’.

The cases have gone against all three firms.

In this most recent case Pimlico Plumbers and Charlie Mullins v Gary Smith, the appeal by Pimlico Plumbers was dismissed by the Court of Appeal.

They upheld the EAT decision that the plumbers are workers, not self-employed contractors (or employees).

Deciding the employment status of an individual required a careful analysis of the facts, as with all cases, and here, despite a number of factors indicating self-employment (including Smith’s own belief as to the nature of the relationship), he was still held to be a ‘worker’.

For example, Smith wore Pimlico Plumber’s uniform and drove a van with Pimlico’s logo, the written agreements gave the impression he was in business on his own account.

He was paid against receipt of invoices, personally accounted for tax and was VAT registered. He was required to provide his own tools, equipment and materials and maintained his own insurance.

Although required to work a minimum number of weekly hours, he could choose particular working hours and could reject particular jobs. Pimlico was under no obligation to provide work if none was available.

Essentially, Smith was found to not be an employer but was found to be a worker principally because of the obligation on him to provide his services personally.

The right of substitution (i.e. the person being given the freedom to choose someone else to provide the service) was considered and the court thought that only if there is a genuinely unfettered right to provide a substitute will it have an impact on worker status.

A conditional right to substitute may or may not be consistent with worker status, depending on the conditionality e.g. if substitution is only possible with the consent of another who has absolute discretion to refuse, this is still likely to amount to a personal performance requirement on the individual.

It was held, the most Pimlico Plumbers were willing to tolerate was a form of job-sharing or shift swapping without any legal obligation, which was insufficient to amount to an unfettered right of substitution.

Implications?

Although it is a fact sensitive case, the decision by the Court of Appeal is nevertheless likely to be a leading case on employment status in future years.

Employers need to understand that it is the reality of the situation that is key, rather than any labels in the contractual documentation, and that models denying employment rights may be subject to heavy scrutiny and could be challenged by any person who feels they are missing out on the entitlements they would otherwise get.

Employers should examine carefully the practical reality of the relationship with those whose services they use, rather than relying on the ‘form’ of the document e.g. if the contract provides for the right of the individual to call upon another to act as their substitute (which would indicate a self-employment business relationship, rather than a contract of employment or a ‘worker’ contract’) it might be helpful if that has actually happened on more than an isolated occasion.

The future?

This latest judgment is consistent with the current trend of decisions but will certainly not be the last word on the matter – there is too much at stake for these cases not to be appealed plus there are further cases in the pipeline.

Undoubtedly the “gig” economy has become, and will continue to be, a hot topic in 2017 and what rights those in it should have.

It’s become such an issue since a record number of people in the UK are now self-employed and there are a significant number individuals employed on a temporary basis.

With the increasing rise of the ‘gig economy’ businesses, on demand apps and technological advances it has meant they, understandably, are wanting to use people in non-traditional ways.

This increasing desire for more flexible working practices has led these businesses to so far adopt models of self-employment for their workforce to deliver the service.

The challenge is for the law to keep pace to allow such businesses to develop and flourish, whilst also striking the balance to protect people from being abused and to ensure their legitimate rights are recognised.

There are several ongoing inquiries and consultations into this area too that will have an impact at some point in the future.

Given all this work and interest politically and legally, it is not unreasonable to expect legislative developments in this area.

Not forgetting of course that Brexit could act as a catalyst to a review of existing EU-derived legislation on atypical workers with the aim of creating a new legislative framework tailored to the UK. Watch this space!