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Employment update
  • Published:
    14 June
  • Area of Law:
    Employment, Employment Tribunals

Pimlico Plumbers loses appeal on worker rights

The Supreme Court has issued its eagerly anticipated judgment in Pimlico Plumbers Ltd and anor v Smith. 

The crux of the matter was whether a plumber, Mr Smith, who worked under a contract describing him as an independent contractor, was in fact a worker under the Employment Rights Act 1996 and the Working Time Regulations 1998, and in employment for the purposes of the Equality Act 2010.  If he was, then his claims for failure to pay holiday pay, unlawful deductions from wages and disability discrimination would not fall away.

The employment judge held in Mr Smith’s favour. In the judge’s view, the main purpose of the contract was for Mr Smith personally to provide work for Pimlico Plumbers and he did not have an unfettered right to substitute at will. Appeals by Pimlico Plumbers to the Employment Appeal Tribunal and the Court of Appeal were unsuccessful.  Pimlico Plumbers then appealed to the Supreme Court which unanimously dismissed the appeal.

The Supreme Court considered two key issues:

Had Mr Smith undertaken to provide a personal service?

Mr Smith’s only right of substitution was his ability to send another Pimlico Plumbers’ operative in his place i.e. someone else bound to Pimlico Plumbers in similar terms. The employment judge was entitled to conclude that this limited right of substitution was not inconsistent with an obligation to perform services personally.

Was Mr Smith a client or customer?

On the one hand, Mr Smith was free to reject a particular offer of work, and was free to accept outside work if no work was offered by Pimlico Plumbers. He also bore some of the financial risk of the work, and the manner in which he undertook it was not supervised by Pimlico Plumbers. However, there were also features of the contract which strongly militated against recognition of Pimlico Plumbers as a client or customer of Mr Smith. These included the requirement that he wear a branded uniform, drive a branded van, carry an identity card and closely follow the administrative instructions of its control room; the severe terms as to when and how much Pimlico Plumbers was obliged to pay Mr Smith; the contractual references to “wages”, “gross misconduct” and “dismissal”; and the suite of restrictive covenants regarding his working activities following termination.

What does this mean?

The judgment came as no surprise, but it will have significant implications for the “gig economy” and other cases that are going through the Court system at the moment. It acts as a stark reminder to any organisations that use self-employed contractors that any agreements need to be worded correctly. It was significant that Mr Smith’s ability to send a substitute was so heavily restricted and this worked against Pimlico Plumbers. Organisations that use a similar model would therefore be wise to review their contractual arrangements as any mistakes could be costly, both in financial and reputational terms.

We are currently carrying out audits to identify potential risk areas for clients. If you would like us to assist, please contact a member of the team.

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Jon Saltinstall, Senior HealthCare Banking Consultant, Lloyds Bank