A case heard at the Supreme Court last week could have a lasting effect on the so-called “Gig” economy here in the UK.
What is the “Gig” Economy?
The “gig” economy is described as “the labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs”.
People who work within the gig economy will only be paid for the work that they carry out, e.g. couriers etc. Though sometimes they may be entitled to holiday pay.
Plumber Gary Smith worked solely for Pimlico Plumbers and was classed as self-employed for tax purposes. Mr Smith paid self-employed tax and was VAT registered.
Mr Smith worked for Pimlico Plumbers for six years but after suffering a heart attack, he requested a reduction in his working hours from five days per week to three days. Pimlico Plumbers denied this request and Mr Smith was dismissed.
During his time working for Pimlico Plumbers, Mr Smith was required to wear the company’s uniform, drive the company’s branded van, work when he was told to, and could not pass any work to anyone else of the same qualification and experience.
Mr Smith brought proceedings against Pimlico Plumbers at an Employment Tribunal in 2011, alleging that: –
- he had been unfairly dismissed;
- Pimlico Plumbers had unlawfully deducted amounts from his wages;
- he had not been paid for a period of statutory annual leave; and
- he had been discriminated against because of his disability.
The Employment Tribunal made the decision that Mr Smith had not been an employee under a contract of employment, and therefore could not complain of unfair dismissal.
However, the Employment Tribunal did decide that: –
- under section 230(3) of the Employment Rights Act 1996, Mr Smith was a ‘worker’;
- under Regulation 2(1) of the Working Time Regulations 1998, Mr Smith was a ‘worker’; and
- under section 83(2) of the Equality Act 2010, Mr Smith had been in ‘employment’.
This meant that Mr Smith could proceed with the latter of his three complaints.
The Employment Tribunal made directions to consider these complaints substantively at a later date.
Pimlico Plumbers appealed this decision at an Appeal Tribunal and then at the Court of Appeal, but were unsuccessful at both attempts.
The Court of Appeal ruled that Mr Smith was a worker because of his lack of control over the work that he carried out (he was contractually obliged to do a minimum number of hours work per week) and also because he did not have the right to transfer his work to a subordinate.
Supreme Court Ruling
Pimlico Plumbers then appealed again to the Supreme Court but this did not go in their favour again.
The Supreme Court was asked to consider whether or not Mr Smith had the right to send a substitute to carry out any work he was given by Pimlico Plumbers. The Supreme Court found that Mr Smith was entitled to do this but that any substitute had to be under contract with Pimlico Plumbers.
Therefore, the leading feature of Mr Smith’s contract was one of an obligation of personal performance.
Another issue asked of the Supreme Court was whether or not Mr Smith was marketing his services elsewhere or whether he was an integral part of Pimlico Plumbers, and as such, whether Pimlico Plumbers was a client or customer.
The Supreme Court held that Mr Smith had some independence in terms of operational and financial obligations but that his services were marketed by Pimlico Plumbers. He was also subject to Pimlico Plumbers’ strict regulations (e.g. he was required to wear the company’s uniform, drive the company’s branded van, and work when he was told to etc). Therefore, Pimlico Plumbers was not a client or a customer.
This meant that Mr Smith was a worker and therefore had various employment rights including the right to be paid minimum wage and holiday pay.
Mr Smith’s complaints will now be sent back to the Employment Tribunal for it to make the final decisions.
This case will have a far-reaching effect on the gig economy and the rights of all independent contractors.
Other businesses who use independent or self-employed contractors could see a huge wave of claims made against them as a result of this ruling.
Charlie Mullins, CEO of Pimlico Plumbers, said “… thousands of companies across the UK, who use contractors in an honest and responsible way, remain exposed to huge potential claims in the future.”
However, it is highly unlikely that other cases, like those involving Uber and Deliveroo, will be stopped in their tracks.
All businesses have different ways in which they work. They also have different contracts and make different demands on their staff.
For example, some businesses will allow a worker to ask someone else of equal qualification and experience to do the job instead, but others don’t.
And that is one of the key tests of employment status.
If you would like any advice on the gig economy and how this ruling may affect you and your staff, contact us at firstname.lastname@example.org or call us on 01634 564 136.