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When is a contractor not a contractor?

 

We are often told by economists and journalists that we live in a gig economy: a labour market characterised by the prevalence of short-term or free-lance contracts as opposed to permanent jobs.   Over 15% of working people in the UK are now self-employed.   To some extent, such an economy favours businesses over individuals as it means they can take on labour without shouldering the burden of employee rights, which can be costly.  Indeed, a Government report has warned that “unscrupulous” employers are in a position to exploit low paid and low skilled workers.  On the flip side for self-employed individuals, they can usually take advantage of more flexibility in their working routine and a more advantageous tax regime. 

However, a recent landmark Court of Appeal case has cast doubt on the long held view that the self-employed are not entitled to employee rights. 

In the case of Pimlico Plumbers & Charlie Mullins v Gary Smith, Mr Smith had worked for PP for 6 years until 2011 as a “self-employed operative”.  He was described as an independent contractor of the company, in business on his own account and had to account for his own tax.  He provided his own equipment and took personal liability for the work that he carried out (and was insured in this regard), all of which are indicators of self-employed status.  However, he did not have an absolute right to transfer work to another operative (i.e. if he was unable to carry out a job he could not arrange for a substitute to do it in his stead).  In addition, he worked a minimum of 40 hours a week, he had worked for PP exclusively for 6 years, had to wear a company uniform and drive a Pimlico van, factors which are more indicative of employment or worker status. 

When Mr Smith suffered a heart attack in 2010, he wished to cut down his hours of work.   The company refused to allow this, took away the company van and terminated his contract.  Despite being described as an independent contractor, Mr Smith made claims at the Employment Tribunal to enforce basic worker’s rights including national minimum wage, paid holiday and protection from discrimination.  PP argued that the claims should fail because Mr Smith was a self-employed contractor rather than an employee or a worker (i.e. someone who is entitled to some basic worker rights, but not full employee rights). 

The Employment Tribunal upheld Mr Smith’s claims, as did the Employment Appeal Tribunal and the Court of Appeal.  Whilst the courts did not rule that Mr Smith was an “employee”, they did rule that he was a “worker” (i.e. someone who is entitled to some basic worker rights, but not full employee rights – see the table below comparing the rights of each). 

Charlie Mullins, the founder of PP, has indicated that he will appeal to the Supreme Court: however, if the Court of Appeal’s judgment stands this could have significant implications for businesses reliant on free-lance/contractor labour including companies such as Uber and Deliveroo, both of which are reportedly involved in rows over employment status.  

Whilst the Court of Appeal warned against drawing too many wide-reaching conclusions from the Pimlico case, it does appear that Tribunals and Courts are aware of the issues caused by the gig economy and will look closely at working arrangements, and behind “labels” to get to the reality of the situation.   

If you’d like to discuss the employment status of your workforce, please get in touch with Hannah Roche or Katie Pearson

 

Statutory Right

Employee

Worker

Written particulars of employment

Yes

No

Statutory sick pay

Yes

No

Protection from unlawful deductions from wages

Yes

Yes

National Minimum Wage

Yes

Yes

Paid annual leave

Yes

Yes

Rest breaks

Yes

Yes

Maximum working week

Yes

Yes

Protection on the transfer of undertakings (TUPE)

Yes

No

Protection for making a protected disclosure

Yes

Yes

Pension auto-enrolment

Yes

Yes

Statutory maternity/paternity/adoption/parental pay

 

Yes

 

No

Maternity/paternity/adoption/parental leave

Yes

No

Protection from unlawful discrimination

Yes

Yes

 

 

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