It was a ‘landmark’ decision according the Independent, the Telegraph and Sky News. Conversely, Charlie Mullins, CEO of Pimlico Plumbers, lamented the Supreme Court’s ‘failure to drag employment law into 21st century (which would) lead to a ‘tsunami of claims’. On closer analysis, however, Pimlico Plumbers v Smith [2018] UKSC 29 lives up to neither the hype nor the condemnation. Indeed, the most striking feature of the Supreme Court decision is the series of questions which remains unanswered.

Background brief

A curious fish: the conditions of service

Mr Smith carried out plumbing work for Pimlico over some six years between 2005 and 2011. He made two written agreements: the first dated 25 August 2005 and the second (which replaced the first) made on 21 September 2009 and wrongly dated 21 September 2010. Focus was mainly placed on the latter.

It was a curious fish. On the one hand, it provided that there was no obligation to offer or accept work, that Mr Smith would be responsible for all tools and materials, that he was required to pay van rental hire and that he was ‘an independent contractor of the Company in business on your own account. Nothing in this Agreement shall render you an employee, agent or partner of the Company.’ On the other hand, it required Mr Smith to notify Pimlico of any potential conflict of interest, to represent the Company in accordance with ‘a high standard of conduct and appearance’ and the ‘reasonable rules and policies of the Company’ and even went so far as to impose a post-termination non-compete clause.

Both agreements were to be read in conjunction with a manual stipulating a normal working week of 40 hours, that Mr Smith wore a uniform and carried an ID card at all times and notified the Company of any periods of unavailability. Non-compliance with the rules in the manual carried with it the threat of ‘instant dismissal’.

Question of status: the claim and previous decisions

Mr Smith sadly suffered a heart attack following which Pimlico terminated the agreement. He brought claims of unfair dismissal, unlawful deduction from wages, holiday pay and disability discrimination.

It is important to emphasise that in employment law, everything hinges on status. Absent the standing to bring a claim – whether as a worker or as an employee – the claims cannot be brought. These claims required him to establish that he fell into the following categories:

i. Unfair dismissal: that he was an ‘employee’ of Pimlico under s 230(1) Employment Rights Act 1996 (ERA 1996) working under a contract of service;
ii. Unlawful deduction from wages: that he was a ‘worker’ for the purposes of s 230(3)(b) ERA 1996 or a ‘limb (b) worker’, that is to say an individual who works under any other contract ‘whereby the individual undertakes to… perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual’;
iii. Working Time Regulations: that he was a ‘worker’ pursuant to s 2(1) Working Time Regulations 1999 (WTRs 1999);
iv. Discrimination claims: that he was in Pimlico’s ‘employment’ as defined in s 83(2) Equality Act 2010 (EqA 2010).

The threshold suggested at (ii), (iii) and (iv) is an intermediary one between full-scale employee and the genuinely self-employed. As the Supreme Court (SC) pointed out, this middle ground has some vintage dating back to at least 1875 under the Employers and Workmen Act. Whilst there were some ‘murmurs of discontent’ in the Supreme Court at the suggestion that there was no looser concept of status in the context of discrimination, these were not actively pursued.

In its original judgment the Employment Tribunal (ET) determined that Mr Smith was not engaged under a contract of service and as such could not be an employee with unfair dismissal rights under s 230 ERA 1996. Whilst there was an unsuccessful attempt on Mr Smith’s part to challenge that finding before the EAT it has been undisturbed and formed no part of the appeals to the Court of Appeal (CA) or SC.

The ET did conclude, however, that Mr Smith ticked all other boxes and as such he could proceed with all claims with the exception of unfair dismissal. Pimlico’s serial appeals before the Employment Appeals Tribunal, CA and SC – albeit for somewhat differing conclusions – left that finding set in stone. Since it is the last word on point, the correct point of focus is the SC decision.

Unpicking the Supreme Court decision

Mode of arrival

Lord Wilson, with whom the remainder of the court agreed, dismissed Pimlico’s appeal in robust terms.

Given that the outcome was widely predicted, what matters is not so much the outcome as the mode of arrival. In the eyes of the Supreme Court there were two broad questions raised by the appeal: what level of personal service was required and the whether the relationship between Mr Smith and Pimlico could be characterised as one of client/customer.

Personal performance

A limb (b) worker must ‘perform personally’ the work in question. That said, in the seminal judgment of Ready Mixed Concrete (South East) ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, McKenna J observed that ‘a limited or occasional power of delegation may not be’ inconsistent with a contract of service. In the present case, the ET found that Mr Smith had a limited facility to substitute: did this preclude worker status? At what point does the power to delegate shift the agreement into one of self-employment?

Pimlico pointed to superseding terms of the contract which suggested a right to assign or substitute ‘subject to the prior consent of the Company.’ It was said that the ET’s analysis was inadequately reasoned and the reasoning was, by consensus, confused.

"The problem of employment rights in the so-called gig economy is not confusion in the law but rather companies who think the law need not be obeyed. Pimlico Plumbers lost its argument over worker status four times in a row. We now need the government to start actively enforcing the law rather than playing the role of useless bystander"  – Jason Moyer-Lee, General Secretary of the Independent Workers Union of Great Britain

The SC found that Pimlico itself was, however, the cause of that confusion – not least because it sought to rely upon the terms of a contract which came into effect only after Mr Smith was dismissed. ‘So Pimlico there put before the tribunal an irrelevant contract, cast in highly confusing terms and now complains that the tribunal’s interpretation of them was highly confused.’ On proper analysis, Mr Smith’s only right of substitution was of another Pimlico operative which could not be widened by reference to ‘ambiguous terms to which Mr Smith was not a party.’

Considering matters afresh, the SC found that the restricted right of substitution was no bar to worker status. The focus in the 2009 contract remained on personal service and the application of ‘your skills’ exercised with a ‘high standard of conduct and appearance.’ At the heart of this relationship remained an obligation of personal performance to which the right of substitution served only as a tightly constrained exception. Critically, the Supreme Court went one step beyond the CA analysis. Delegation could cover scenarios where Mr Smith was not only unable but also unwilling to accept work and yet still be consistent with him being a worker since the focus of the contract remained personal service.

Client or customer?

Mr Smith presented himself as self-employed for tax purposes and purchased materials to then charge the customer albeit funnelled through Pimlico. He was free to refuse work and take outside opportunities and performed work without supervision. Pimlico argued, therefore, that the ET erred in finding that the relationship between them was not one of client or customer ie the dividing line for limb (b) workers.

This too was given short shrift: there was a ‘tight control’ reflected in uniform rules, the need to drive a branded van to which a tracker was attached and the requirement to adhere to administrative instructions from the control room. These requirements were not ‘ill-considered lapses’ but an indication that the ET was entitled ‘by a reasonable margin’ to regard Mr Smith as a worker. The appeal was, as a consequence, dismissed.

Implications... missed opportunities

The SC judgment does not establish a new principle of law. It is perhaps more remarkable for the territory which was not covered in three central respects:

  • First, the SC has provided no definitive guidance on when a substitution clause can oust personal service: it remains a question of fact and degree which provides little in the way of certainty for the putative worker. It is hoped that the attempts to secure union recognition vis-à-vis Deliveroo launched by the Independent Workers Union of Great Britain will provide greater clarity in this regard.
  • Secondly, the ‘murmurs of discontent’ as regards the right to pursue discrimination claims will continue unabated. The wider EU concept of a worker cannot sensibly be tallied with s 83 EqA 2010. It is only a question of time before these are ventilated again.
  • Thirdly, and perhaps most importantly, the SC did not grapple with the regrettable decision of the CA in Windle v Secretary of State for Justice [2016] ICR 721 which determined that where there are gaps in service between assignments this was a factor pointing against worker status. On Mr Smith’s ‘energetic submission’ the fact that there are gaps points towards the very subordination which should confer worker protection.

Those with an interest in this field are well used to missed opportunities. Arguably, the Taylor Review did not go far enough to provide clarity and the government, consumed as it is by Brexit, shows no sign of implementing those recommendations that were made. The SC decision is part of a wider narrative but does not serve as a final chapter. Until definitive action is taken, the law will continue to develop by way of individual challenges to specific relationships. These show no sign of receding: these three areas of uncertainty are likely to be at the forefront of various actions, such as Uber v Aslam [2018] ICR 453 (to be heard by the CA in October 2018) and a test case brought by 27 arts educators against the National Gallery in their claims for discrimination, collective consultation rights and holiday pay. The march towards employment protection shows no sign of slowing down yet.

Chris Milsom, of Cloisters, specialises in employment, equality and human rights law. His ‘worker status’ cases include Day v Health Education England and Gilham v MoJ (test cases in the Court of Appeal on the status of junior doctors and judges in whistleblowing claims) and an ongoing group action against the National Gallery.

ON DEMAND: the casualisation gig’s not up

Employers having their cake and eating it, or the ultimate in flexible working, the gig economy has played no small part in self-employment figures reaching a high of 15% of total employment – 5 million – during 2016. Companies are increasingly turning to independent contractors and freelancers instead of full-time employees, with workers paid for each ‘gig’ – eg food delivery or a taxi journey – rather than a day or hourly rate. Technology of course has been a key driver and the gig economy lends itself to people using apps to sell their labour, often with their own assets.

The Chartered Institute of Personnel and Development estimated in 2017 that there are approximately 1.3 million people (4% of all in employment) working in the gig economy in the UK. It found that a high proportion (58%) are permanent employees, engaging in gig economy activity on top of their more ‘traditional’ employment to top-up income. Just four in ten (38%) of workers surveyed said that they felt like their own boss. More than half (57%) agreed that gig economy firms are exploiting a lack of regulation for immediate growth. The research also suggests that the gig economy will continue to increase, with 12% of UK working-age adults who have not participated in gig economy work in the last 12 months saying they are thinking about trying different forms of gig economy activity over the next year.

In 2016 the McKinsey Global Institute surveyed 8,000 such workers. Independent work: Choice, necessity, and the gig economy found that up to 162 million people in Europe and the United States – 20-30% of the working-age population – engaged in some form of independent work. They are demographically diverse and largely fit into four categories: 30% are free agents, who actively choose independent work and derive their primary income from it; 40% are casual earners, for supplemental income and by choice; 14% are reluctants, who make their primary living from independent work but would prefer traditional jobs; and the financially strapped, 16%, who do supplemental independent work out of necessity.