A recent Court of Appeal judgment has potentially significant consequences for businesses engaging self-employed contractors

Last Friday (10 February), the Court of Appeal gave its judgment in the latest court case on the gig economy. The judgment follows hot on the heels of similar decisions involving Uber drivers last October, CitySprint cycle couriers at the start of the year, and Deliveroo cycle couriers’ attempts to obtain worker rights through union recognition.

Gary Smith was a plumber working for Pimlico Plumbers and sought to bring claims against them in the employment tribunal. To bring some of his claims – for example, unfair dismissal and wrongful dismissal – he needed to demonstrate an employment relationship existed between him and Pimlico. For others, such as disability discrimination and holiday pay, he needed to prove the lower bar of a ‘worker’ relationship.

Pimlico claimed he was a self-employed contractor so was not entitled to bring any of the claims. The Court of Appeal agreed with both the employment tribunal and the Employment Appeal Tribunal (EAT) that Mr Smith was a worker, although it did not find him to be an employee. A ‘worker’ is an intermediate status: an individual who undertakes to perform work or services personally but does not carry on a business undertaking of which the would-be ‘employer’ is his or her client.

The key factors considered by the Court of Appeal were:

  • Substitution: the right of substitution is important in showing whether there is in fact a need for personal service. In Mr Smith’s case, substitution without consent was only permitted to another Pimlico ‘operative’ – essentially he was only allowed to swap shifts.

  • Working hours: while Mr Smith could technically state he was unavailable on a given day, this was overridden by the fact that the Pimlico ‘manual’ to which he was subject – essentially a staff handbook – stated he was required to work for at least five days and 40 hours a week. Pimlico gave evidence that it was not worth its while for its operatives to work for less than a full working week.

  • Pimlico exerted control over Mr Smith in other ways. For example, he was subject to post-termination restrictive covenants, demonstrating that he was not in business on his own account, and had to wear a uniform.

The Court of Appeal – and the employment tribunal and EAT in other recent judgments – applied well-established legal principles and case law to Pimlico’s operating model.

Businesses should assess the structure of their workforce, in particular those staff they treat as self-employed, and evaluate the risks they face if a court or tribunal finds them to be workers or employees. Following the Pimlico decision, businesses should consider the extent to which individuals are required to provide personal service and the level of control exerted over them. The wording of written contracts and other documents will have some influence, but it will not be definitive and the reality of the situation is key.

The issue of employment status and the gig economy continues to be a hot topic. Pimlico has stated it will consider appealing to the Supreme Court and Uber has already appealed to the EAT. In the meantime, the Department for Business, Innovation and Skills has published its employment status review and the government has commissioned an independent review of employment practices in the modern economy. It remains to be seen whether the government will take matters into its own hands and legislate in this area.

Sarah Ozanne and Rob Briggs are employment lawyers at CMS Cameron McKenna