Case law: Supreme Court confirms plumbing business generating and passing work to 'independent' third parties must treat them as workers

Businesses which generate and pass work to third party individuals to carry out on a 'self-employed' basis, should consider whether they may in fact be 'workers' under UK law and entitled to basic employment law rights, following a Supreme Court ruling.

The Supreme Court has ruled that a plumber purportedly engaged as a self-employed independent contractor, was in fact a worker. This means he can now make a claim against his employer for holiday pay, unlawful deductions from wages, and disability discrimination.

A self-employed independent contractor is not entitled to employment law rights such as the national minimum/living wage, paid annual holidays, rest breaks, maximum weekly working hours and auto-enrolment pension contributions. An employee, however, enjoys full employment rights.  A 'worker' is entitled to some of those rights. The legal test of whether an individual is a 'worker' is:

  • whether they work under a contract of employment or any other contract (whether express or implied) under which the individual undertakes to do or perform personally any work or services for another party to the contract, and
  • the other party's status is not (by virtue of the contract) that of a client or customer of the individual's profession or business undertaking

Relevant factors include whether the individual is providing a personal service or can substitute someone else to do their work; whether the employer is a customer of the individual's business; and the degree of control the employer exercises over the individual.

In this case, a plumber worked for a company in circumstances where clients were given the impression he was an employee. However, his paperwork with the company said – and he believed - that he was working for the company as an independent contractor.

However, he had a heart attack and the company stopped giving him work. He claimed unfair dismissal and disability discrimination - which are employment law rights.

One key issue was whether the plumber was obliged to carry out work for the company personally, or could provide a substitute to do it instead.

The Supreme Court found that he did not have an absolute right to provide a substitute at his discretion, and he therefore had to provide a personal service (even though he could substitute another plumber already on the company's book – akin to employees swapping shifts). That meant he was a worker for the purposes of the law - unless the company could show it was a client or customer of his.

Factors indicating he was not a worker included the fact that he could choose which work to accept; he could do outside work if the company did not provide him with any; he carried part of the financial risk arising from his work (he was personally liable for defects, and carried professional indemnity insurance); and he was not supervised. These indicated a relationship of a customer and self-employed contractor.

However, the Supreme Court said these were not enough to override other facts indicating that he was a worker, including that:

  • He had to wear a uniform with the company's branding on
  • He had to drive a branded vehicle
  • He had to carry a company identity card
  • The company looked after much of the administration attached to his work
  • It decided when and how much he was paid
  • His contract contained terms like 'wages', 'gross misconduct' and 'dismissal', and imposed restrictions on his work activities if his relationship with the company ended, all of which were inconsistent with the status of a self-employed contractor

Applying these principles, the Court found that the plumber did not have an unfettered right to substitute another worker if he was personally unable or unwilling to fulfil a job request, and the company was neither a client nor a customer.  He was, therefore, a 'worker' and entitled to basic employment law protections.

Operative date

  • Now

Recommendation

  • Businesses contracting with self-employed contractors should ensure the contract terms indicate the contractor is self-employed, and that the actual working practices are consistent with the contract terms - or risk the individual being found to be a worker, or even an employee, and entitled to employment law rights

Case ref: Pimlico Plumbers Ltd & Anor v Smith [2018] UKSC 29

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