The Court of Appeal’s ruling on Pimlico Plumbers Ltd v Smith is ‘significant’ but ‘not surprising’, according to employment solicitors.
Today’s ruling by the Court of Appeal has upheld the EAT’s decision, which found that the plumbers in this case were workers but not employees. This ruling is a major milestone because this is the highest court to consider such a case. Employment lawyers add that the ruling highlights the ‘pressing need’ for legal clarity around the status of those working in the gig-economy.
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Udara Ranasinghe, Partner in the Employment and Pensions Group for DAC Beachcroft LLP says:
“The key take away from this case is that it is important to get the contract right between the parties to minimise legal risk. However a contract cannot magically transform the reality of the situation – if that reality is that someone is a worker or an employee, the courts will be slow to find differently.
“The employment tribunals play a critical role in this as they are responsible for making factual findings and it will be rare indeed for an appellate court to overturn these. In this sense this case does not take the existing case law much further forward.
“Although there is a talk of this case being appealed to the Supreme Court the outcome is not surprising – indeed it would be more surprising were the case successfully appealed.”
Louise Singh, professional support lawyer supporting the Employment, Pensions and Immigration Team at Weightmans LLP says:
“This case once again highlights the difficulty many employers face in balancing the need for consistency and quality, against the need to maintain flexibility and keep down costs. It serves as another reminder to think carefully about those you engage and whether your categorisation is, in reality, consistent with their day to day working arrangements.
“This decision is also remarkable for the amount of media attention it has attracted. When the case was heard at earlier tribunal stages, it went largely unnoticed outside HR and employment law circles. Now however, it appears that any case where employment status is in play will be headline news.
“As a result it is likely that other claims will follow, and they are equally as likely to have a damaging impact on those who do not address the issue. It’s no longer about the claim for compensation – intense media scrutiny and a raft of public opinion are expected to come as standard too.”
Glenn Hayes, an employment partner at Irwin Mitchell, says:
“This is a significant ruling for the workers at Pimlico but it will also concern those companies operating in the ‘gig economy’. We are seeing increasing numbers of individuals challenging their status and claiming to be workers or employees. CitySprint couriers and Uber drivers recently persuaded separate tribunals that they were workers and although Uber is now appealing this, tribunals are clearly taking a pragmatic and bold approach to determining status cases, despite contractual arrangements which are designed to give the appearance that individuals are genuinely self-employed.
Kathryn Dooks, employment partner at Kemp Little LLP says:
“The judgment is not surprising given the previous judgments of the lower courts in the case, other recent judgments such as Uber and CitySprint and the general direction of travel in these kinds of cases.
“However, it does highlight the pressing need for legal clarity around the status of those working on a self-employed basis and in the so called gig economy generally. Pimlico Plumbers took into account HMRC guidance around the difference between self employed workers and employees but this case acts as a stark reminder that businesses must always consider the position from an employment law perspective as well as a tax one.
“Tribunals and courts are increasingly willing to look behind the labels businesses use for their staff and will take into account the reality of the working arrangements and relationships. Businesses and workers need certainty in how they contract with each other as this current level of uncertainty is to no one’s advantage. We hope that the Taylor review into modern working practices and other reviews will lead in due course to such clarity being provided.”
Euan Lawrence, associate solicitor at Blacks Solicitors LLP says:
“The main reason why this is of great significance is that the business model of companies like Uber, Hermes, City Sprint and many others within the gig economy are largely predicated on having very low overheads when it comes to staffing and not being subject to the many statutory obligations on organisations that either employ employees or engage workers (the latter being an intermediate category between employee and self-employed that comes with certain rights such as the right to national minimum wage and paid holiday). If the tribunals continue to find that the individuals who provide the services on behalf of these companies are in fact workers (or even employees) then it is likely that a number of the companies will either go out of business or will have to substantially alter their business models in order not to be caught out.
“For this reason, we expect there to be considerably more litigation yet to come – Uber, in particular, is very likely to appeal the Employment Tribunal judgment against it given the number of Uber drivers there are in the UK who could (if the judgment is not challenged) assert that they were entitled to rights as workers.”
Liz Stevens, Professional Support Lawyer, Birketts says:
This decision by the Court of Appeal provides us with useful guidance, if not establishing any new legal principles, on the question of worker status following a number of recent tribunal decisions on the issue and against the background of a number of ongoing reviews and inquiries into employment status. The case emphasises once again the close scrutiny that tribunals and courts will apply to the contractual documentation entered into by the parties, as well as examining the reality of the working arrangement between the parties. Pimlico Plumbers were somewhat hampered in their argument that the claimant plumber was self-employed by what appear to have been quite onerous contractual restrictions on the individual, including no less than eight covenants restricting the business activities of the individual after the termination of the agreement with Pimlico Plumbers. The contractual agreement did not expressly provide either an unfettered or a qualified right to substitute the services of another plumber for that of the claimant. For these reasons, the Court of Appeal was satisfied that the key requirement for worker status of ‘personal service’ applied to the relationship between the parties.
Sean Nesbitt, partner in the Employment, Pensions & Mobility team at international law firm Taylor Wessing says:
“Today’s Court of Appeal judgment is at least as significant as the Uber one on the worker status of drivers. First, it is a senior Court of Appeal judgment, given by the Master of the Rolls and including another eminent employment specialist, Lord Justice Underhill. It carries more weight than any judgment of the Employment Appeals Tribunal in the Uber case, which is yet to be heard.
“Second, it reminds the market of the broader grounds on which people can be found to be workers. Both the Uber case and City Sprint were heavily influenced by findings that the facts were different to how they were presented by contracts drafted by an “army of lawyers” – the Autoclenz argument. This is not a case relying on Autoclenz, and the Master of the Rolls simply reminded us that:
“As with any contract… [it]… has to be interpreted in the light of the relevant and admissible facts which form its background.” (paragraph 113) In other words, broad reference to context can always influence the interpretation, which can make it more likely that claimants will be able to show they are workers. Thirdly, there is a strong hint that courts in the future may look at restrictive covenants as being one of the important features in determining worker status.
The Court found that:
“The ET was entitled and right to place weight on the onerous restrictive covenants… which, on the fact of it, included a covenant… precluding Mr Smith from working as a plumber in any part of Greater London for three months after the termination.” (paragraph 112)
“The Court actually included the covenants in an annexe to its judgment: this is a strong hint that businesses which include these restrictions may be open to challenge on worker status.
“In other words, a business such as Pimlico cannot have its cake and eat it: if it wants to say someone is self-employed, their economic freedom and ability to compete are an important feature of that status.
“Many businesses which use contractors include restrictive covenants. That can cover medical services, accountancy, IT and software development as well as other “relationship” professions. If they want to be secure in engaging people other than as workers or employees, they may need to look again at the terms included for their business protection. It will likely carry weight in the mainstream economy as much as in the continuing flow of gig economy and courier cases yet to be heard.”
