This recent ruling by the Supreme Court highlights the perennial difficulties that parties face in determining the legal status of an individual for employment law purposes.
The Supreme Court upheld judgments of an employment tribunal, the Employment Appeal Tribunal and the Court of Appeal in deciding that Mr Smith, a plumber who had been engaged for Pimlico Plumbers for approximately five and a half years, was a worker for the purposes of the Employment Rights Act 1996 and the Working Time Regulations 1998.
This finding was despite Mr Smith’s contract labelling him as an independent contractor. This illustrates that the courts can and will disregard the express terms of a contract if it is clear that the parties do not operate in accordance with them (see the 2011 decision of Autoclenz Ltd v Belcher). Courts will scratch below the contractual surface and any opportune labels contained therein in order to ascertain the reality of an employment relationship.
In this particular case, the Supreme Court based its decision on, among other things, the following key factors:
- Personal service was a dominant feature of Mr Smith’s contract and the right to substitute was fettered to such an extent as to not be worthy of recognition.
- Mr Smith was required to drive a Pimlico Plumber branded van, wear a Pimlico Plumber uniform and carry a Pimlico Plumber identity card.
- There was an obligation on Mr Smith to work a minimum of forty hours per week.
- Mr Smith’s contract contained restrictive covenants that effectively precluded him from working as a plumber in the Greater London area for three months following termination.
The overall picture clearly illustrated that Pimlico Plumbers exercised tight control over Mr Smith and pointed away from him being a truly independent contractor.
Concerns have been voiced that this decision, being binding on the lower courts, will have huge ramifications for the gig economy with many more so-called independent contractors demanding employment rights. However, this viewpoint fails to recognise that the decision, as with many employment status cases, is highly fact-sensitive and is, therefore, unlikely to have much precedent value.
