During the past few months there have been a number of high profiles cases that have called in to question the legal status of an individual. Employment Lawyer, Paula Stuart, considers the key factors that determine an individual’s working status and the impact this can have on a company and an individual’s rights.
Over the past few years there has been an increase in companies whose business model is based on ‘self-employed’ contractors or the ‘gig economy’. The work arrangements typically mean that (at least in theory) the ‘contractors’:
- do not work fixed shifts
- are not required to carry out a minimum number of hours each day
- can work as much or as little as they choose
The advantage to a company of this working arrangement is that self-employed people do not have basic employment rights such as the national minimum wage or holiday pay.
This may sound good in theory but in practice when the individual works regular hours and there is an assumption that they will be available to personally perform the work then this calls in to question their self-employed status no matter what the contract states.
A worker is defined as someone who ‘works under a contract of employment or any other contract, whether express or implied, whereby the individual undertakes to do or perform personally any work or services for another party to the contract’. This wide definition captures many casual, freelance and self-employed workers.
The recent Court of Appeal case Pimlico Plumbers & Charlie Mullins v Gary Smith has highlighted the complex issue of an individual’s status. In this case it was held that a plumber employed by Pimlico Plumbers was a worker and not a self-employed contractor. The contract between the plumber and Pimlico Plumbers described the plumber as a ‘self-employed operative’. The plumber could choose the hours he worked, had to provide his own tools and equipment and was responsible for his own tax and NI. However, he had to wear a Pimlico Plumbers uniform, drove a company van with GPS tracker and had to commit to a minimum number of hours per week. The contract did not give an absolute right for the plumber to send any substitute to carry out the work.
The Court of Appeal upheld the Employment Appeal Tribunal’s decision and found that the Tribunal had been entitled to look beyond the contract and consider the reality of the working arrangement to determine the plumber’s status. It found that the plumber was a worker but not an employee. It is fact sensitive case, but it is nevertheless likely to be a leading case on employment status in future years.
In practice often the company and the individual benefit from the freedom that self-employed status offers to both parties. The status of the individual typically comes in to question when either the arrangement is investigated by HMRC or when the arrangement is terminated and the individual feels they have been unfairly treated.
Following this case, Paula recommends that companies should review their current working arrangements. If you have self-employed contractors it is important to ensure the working arrangements are consistent with such status and that you assess any potential risks.