Employer’s guide to self-employed status following the Supreme Court decision in Pimlico Plumbers
If you use self-employed contractors to deliver services for your business, then you need to familiarise yourself with the Supreme Court’s decision in the Pimlico Plumbers case.
In a stark warning to employers to get their contracts in order, and to ensure they reflect the reality of agreed working arrangements, the court ruled that a plumber who had been labelled as a self-employment contractor with no employment law rights was in fact a ‘worker’ with entitlement to a range of benefits, including paid annual leave and the right not to be discriminated against.
In this article we look at the reasoning behind the decision and its implications for employers.
Worker status - what the court decided
To be a worker under employment legislation, the plumber needed to show that:
· he was engaged by Pimlico Plumbers under a contractual arrangement;
· Pimlico Plumbers could not be said to be one of his customers or clients; and
· he was required to personally perform the contracted tasks.
The contractual arrangement in this case was governed by two agreements, together with a company manual outlining procedures and a number of expected working practices.
When read together the documents were unclear and inconsistent. They were also confusing because they contained terms typically associated with an employer-employee arrangement, such as ‘wages’, ‘gross misconduct’ and ‘dismissal.’
Although the questionable terms had been crossed out and substituted with hand-written amendments which used language more akin to a self-employed arrangement, the court could not help but speculate whether their initial inclusion was indicative of the true nature of the arrangement under consideration.
Customer or client
The terms of the arrangement were such that the company was able to exercise a high degree of control over the plumber. This included being able to require him to wear a uniform, drive a branded van, carry company ID, follow control room instructions and to forgo pay if invoices were not settled on time. He also had to abide by a series of restrictive covenants if he decided to leave or was dismissed.
On this basis the company could not be viewed as a mere customer or client.
It was clear from the way the contractual documentation had been drafted, with frequent references to ‘you’ and ‘your skills’, that the plumber was expected to perform all services himself.
While it was true that provision was made for certain tasks to be passed to someone else, the circumstances in which this could happen were tightly controlled and it was only possible for work to be passed to another Pimlico Plumbers operative.
It was also relevant that the company manual required the plumber to work five days a week for a minimum of 40 hours if there was work available, to give notice of his intention to take annual leave and not to undertake private work for a company customer.
Implications for employers
Although the court’s decision was reached on the very specific facts of this case there are some general points which are likely to be of relevance to all employers, and particularly those operating in the gig economy. These include the desirability of ensuring that:
· the working arrangements of self-employed contractors are not so heavily controlled as to suggest they may in fact be a worker or employee;
· provision is made for contracted work to be delegated by self-employed contractors and preferably not just to someone associated with your business unless necessary;
· self-employed contractors can market their services to the world at large if they choose to do so;
· agreements with self-employed contractors are clear and do not use terminology associated with an employer-employee or employer-worker relationship;
· where contract documentation refers to company policies and procedures, there is nothing within these to cast doubt on an individual’s self-employed status; and
· legal advice is taken promptly if a self-employed contractor seeks to question whether they may in fact be a worker or even an employee.
The overriding thing to take away from this decision is the need to ensure that the reality of what you expect a self-employed contractor to do reflects the working arrangements that have been agreed and which are clearly recorded in a bespoke contract drafted by a lawyer rather than via amendments made to a standard document never intended to be used for such an arrangement.
For help in dealing with your self-employed contractors, or for any other employment law matter, please contact us.