Court of Appeal on Worker Status

February 16, 2017

The Court of Appeal on 10 February 2017 issued an important employment judgment for the gig economy: Pimlico Plumbers Limited & anor v Gary Smith. The decision further refines the definitions of workers and truly self-employed individuals. The case was the latest in a series of gig economy employment cases, such as Uber’s recent unsuccessful round in the Employment Tribunal (“ET”), which is currently being appealed. The Court of Appeal is the highest court to consider a case about workers’ rights in the gig economy thus far.

Court of Appeal Decision

In Pimlico Plumbers, the decisions of both the Tribunal and the Employment Appeal Tribunal (“EAT”) were upheld. Although Mr Smith traded as a self-employed plumber, the Court of Appeal confirmed that he was a worker, because Pimlico Plumbers exercised a high level of control over him. Workers are entitled to sick pay, minimum wage and paid holiday.

The Court of Appeal drew the usual distinction between employees, workers and self-employed individuals at paragraph 66 of its judgment:

(1) Employees: those employed under a contract of service;

(2) Self-employed individuals: those who are self-employed, who contract directly with customers and therefore carry on a trade on their own account; and

(3) Workers: those who are self-employed but who provide services within someone else’s undertaking.

The Court of Appeal also followed the tradition of calling the persons in (3) above “Limb (b) Workers”, highlighting that those individuals and Mr Smith come within section 230(3)(b) of the Employment Rights Act 1996 (“the ERA”) and regulation 2(1) of the Working Time Regulations 1998 (“the WTR”) and that their employment falls within the definition of “employment” in section 83(2)(a) of the Equality Act 2010 (“the EA”).

The arguments at each stage of the litigation centred on whether Mr Smith could substitute another person to do his work, or whether he had undertaken to do the work personally. The Court of Appeal summarised the principles of personal performance and provided examples at paragraph 84 of the judgment as follows:

  • Someone with an unfettered right to substitute another person to do the work is not a Limb (b) Worker;
  • Someone with a right to substitute another person, but who must show that the substitute is as qualified as him/herself, whether or not that entails a particular procedure, is unlikely to be a Limb (b) Worker, subject to any exceptional facts;
  • Someone with a conditional right of substitution might be a Limb (b) Worker, depending on the contractual arrangements and the extent to which the right of substitution is limited or occasional;
  • Someone with a right to substitute only when s/he is unable to carry out the work is usually a Limb (b) Worker, except in exceptional circumstances; and
  • Someone with a right of substitution who requires the consent of another person with absolute and unqualified discretion to withhold consent is a Limb (b) Worker.

In making its decision, the Court of Appeal placed importance on provisions in an agreement from 2009 that repeated phrases such as “you will be competent to perform the work which you agree to carry out” (emphasis added in the judgment at paragraph 86). The judgment also reiterated that, when the ET does a Limb (b) Worker evaluation, there is “no single touchstone such as whether there is a relationship of subordination of one party to another” (paragraph 94). The Court of Appeal additionally relied at paragraph 115 upon Mr Smith’s obligation to work a certain number of hours per week on agreed days, as well as the anti-competition restrictive covenant clause that effectively tried to prevent Mr Smith from working as a plumber in London for three months after leaving Pimlico Plumbers.

Tribunal decision

It is useful to examine which specific arrangements between Pimlico Plumbers and its plumbers the ET placed importance on in its original analysis. The following provisions in Pimlico Plumbers’ company manual from 2005 and an agreement from 2009 were cited as facts in the Court of Appeal judgment at paragraphs 9-32:

  1. Plumbers’ personal appearance: the manual stated “The Company logo’ed uniform must always be clean and worn at all times”;
  2. ID badges: operatives had to carry their Pimlico Plumbers ID;
  3. Mobile phones were issued by Pimlico Plumbers but the cost was deducted from the operatives’ wages;
  4. Working times: the 2005 manual stated “… you should complete a minimum of 40 hours…” per week (evidence pointed to this being 36 hours in fact);
  5. Annual leave: the manual stated “Adequate notice must be given… [and] must be taken in full days”;
  6. On-call work: the 2005 manual stated “Operatives must always be available during their shift to take on-call work”;
  7. A telephone procedure required the operatives to call the control room fairly frequently;
  8. Invoices: according to the 2005 manual, if customers did not pay, the operative did not get paid, and if customers were over a month late paying, the operative was docked 50% (this was reiterated in the 2009 agreement);
  9. Materials: in the 2005 manual, the mark-up for materials was mandated by Pimlico Plumbers at cost plus 20%; in the 2009 agreement, this was phrased as an entitlement to mark up to 20% on materials that cost £3,000 or more and 12.5% on material less than £3,000; and
  10. Vans: the manual required operatives to rent vans marked with Pimlico Plumbers’ logo.

Implications

Until this Court of Appeal case, gig economy cases had been heard only at the ET and EAT level. The Court of Appeal judgment carries considerable weight, and representatives from Pimlico Plumbers have already indicated that they will appeal to the Supreme Court. Additionally, previous cases frequently involved individuals who were fighting for minimum or living wages. Pimlico Plumbers has opened up the pitch of gig economy cases to workers’ rights and circumstances extending beyond mini-cab drivers, couriers and deliverers.

Without a doubt, this Court of Appeal decision has broad repercussions for gig economy firms, whether or not they are caught up in Employment Tribunal litigation, like Uber, Deliveroo, and CitySprint.

The Court of Appeal judgment in Pimlico Plumbers Limited & anor v Gary Smith can be found here.

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