“It can only lead to a tsunami of claims!”
declared Charlie Mullins the CEO of Pimlico Plumbers after losing his appeal in the Supreme Court against the decision that Gary Smith was not self-employed and was a ‘worker’ within the meaning of the Employment Rights Act 1996 and the Working Time Regulations 1998 and was in ‘employment’ within the meaning of the Equality Act 2010.
The judgment means that his claims for unlawful deduction of wages, holiday pay and for discrimination on the grounds of failure to make reasonable adjustment in relation to a disability could proceed.
Commentary is divided. On the one hand, there are those that hail this as a victory for workers’ rights in the ‘gig economy’ where ‘sham’ or ‘forced’ self-employment arrangements are in place to exploit workers and deny them rights to sick pay and holiday pay. On the other hand, many have sympathy with the CEO of the company. Gary Smith was a high earner, he freely opted for self-employment, he was provided with regular work and enjoyed the advantages of the arrangement including a 20% mark-up on any tools he purchased which were charged to the customer. Charlie Mullins points out that many companies feel they have complied with HMRC definitions of employment status and will now find themselves in positions where they may have to pay a worker twice and, if you’ll pardon his pun……find themselves in “hot water”!
This case follows a slew of high-profile employment status cases such as Deliveroo, Uber, Addison Lee and CitySprint and against the backdrop of the Taylor Review of modern working practices.
The judgment was eagerly-awaited but is the outcome a surprise?
Not to most in the employment law field. Many of the considerations in the judgment whereby the tribunal and subsequent courts examined the true nature of the working relationship (not just what was written down in the “carefully choreographed” contract) and explored whether Mr. Smith was required to “perform personally” his work, the degree to which he could send a substitute, mutual obligations and whether Pimlico Plumbers was a client or customer are all familiar concepts and considerations to us in the profession. We advise our clients on a daily basis on contracts of employment, assessing and mitigating risk and review working practices that evolve over time which may mean employment status has changed.
In each case, there are some interesting insights into the considerations courts and tribunals take into account when considering employment status but the debate will continue particularly with the category of ‘worker’ which lies somewhere between ‘self-employed’ and ‘employee’ status and in the context of changing, modern ways of working. There is also an extended definition of a ‘worker’ in the context of the Equality Act 2010 and for the purposes of making a Public Interest Disclosure that can offer some protection and rights that many employers do not anticipate.
The judgment itself points out that “as long ago as 1870 Parliament identified an intermediate category of worker”. The ‘worker’ debate has only lasted 148 years!
What may be more interesting will be the outcome of the CJEU King v Sash Windows case due to be decided at the Court of Appeal. If the court rules that Mr. King, a ‘worker’ who never took any paid annual leave in his 13 years of service, is entitled to unlimited accrual of holiday pay and is not subject to a 2-year back pay limit, Charlie Mullins’ prediction may come true. Some employers may truly find themselves ‘drowning’ in backpay claims.