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Employment status back in the spotlight after Supreme Court ruling

14 June 2018

The Supreme Court has ruled that a freelance plumber was entitled to workers’ rights, following a lengthy dispute over employment status with Pimlico Plumbers.

Gary Smith, who was VAT-registered and paying self-employed tax during his 6-year stint at the London-based firm, was found to be entitled to workers’ rights such as sick pay and holiday.

This decision could have implications for many workers and firms who habitually engage contractors, and brings the distinction between ‘employed’ and ‘self-employed’ back into the agenda.

The days when working relationships were that of ‘master and servant’ have all but disappeared, and we are now left with a rich tapestry made up of the self-employed, employees, agency workers, and gig workers, to name a few.

Employers frequently try to set up working relationships, so that their workers are classified as self-employed, rather than as employees. This is because employees are afforded significantly more rights and entitlements than self-employed individuals, plus no national insurance will have to be paid by the business. Unfortunately for these ‘wily’ employers, employment tribunals do not fall for this farce, and instead look far beyond the superficial set up of the working relationship. Tribunals will analyse the intricate realities of the arrangement to identify the nature of it, and will take little notice of what is written on a piece of paper.

Pimlico Plumbers learned this lesson the hard way, having had engaged workers on the basis of being self-employed. In reality, Mr Smith was working solely for Pimlico Plumbers and was found to have been treated like an employee on a day-to-day basis, for 6 years. The only difference was that the Mr Smith didn’t have the benefit of the additional rights and entitlements of being an employee. This has been the trend for some time now and it seems that when the matter is raised at tribunal, the outcome is often that the ‘self-employed contractor’ is, in fact, an worker. Naturally, this begs the question: how can businesses ensure that the self-employed are actually self-employed?

The Taylor review has highlighted the issue, recommending that the government introduce reform clear guidance regarding worker status, but nothing has been forthcoming as of yet.

ACAS recently reviewed its ‘employment status’ guidance to include a greater focus on self-employment, but it did not include any epiphanies. It still seems that, whilst there are some ‘practices’ that can be put in place, there is no definitive black and white explanation when it comes to employment or self-employment status. As has always been the situation, each case will turn on its facts, and in the absence of any definitive guidance and/or legislation, businesses will just have to follow the guidance of ACAS and case law for the time being.

Pimlico Plumbers have, however, confirmed that they are considering appealing the decision to the European Court of Justice, so watch this space.

Associate solicitor Jenny Hawrot works in our employment law team, advising clients on the full range of employment-related matters including TUPE, defending tribunal proceedings, contractual matters and general employee relations and HR work. She has wide experience working for SMEs, owner-managed businesses and organisations employing in excess of 1,500 staff across the UK. 

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