What do taxi drivers, plumbers and bike couriers have in common?

Angela Gorton is an employment director at Lupton Fawcett.

What do taxi drivers, plumbers and bike couriers have in common? According to recent legal decisions, all involved the businesses they worked for labelling them as self-employed whilst the reality of the situation indicated they were workers for the purposes of employment legislation.

The result – costly claims for the business that they never envisaged they would be liable for.

The Government is currently looking into the issue of vulnerable workers and how they can be better protected. One option being considered is whether such individuals should be deemed to be employees, unless the business can prove to the contrary. The Taylor report is due in the summer. Zero hours, low paid and agency workers are all potentially affected.

The latest in this series of cases on the “gig economy” has once again highlighted the importance of examining the reality of an individual’s working arrangements.

In the case of Pimlico Plumbers & Charlie Mullins v Gary Smith, the Court of Appeal grappled with the question of a plumber’s employment status.

Gary Smith worked as a plumber for Pimlico Plumbers. He was VAT registered, taxed on a self-employed basis and provided his own materials. However, he was also required to be available to work for 40 hours per week, to comply with the company’s detailed rule book, to drive a van bearing the company’s logo which he had to hire from the company, to use a company-issue mobile phone and to wear a company-branded uniform. The company considered him to be self-employed.

Mr Smith had a heart attack in 2010 and asked the company if he could reduce his working time from five days to three days. The company refused, took away his branded van and terminated his contract. His claims of unfair dismissal and wrongful dismissal were unsuccessful as he wasn’t deemed to be an employee. However, his claims for holiday pay and disability discrimination were allowed as he was found to be a worker.

One of the major factors in leading the Court of Appeal to this conclusion was the fact that Mr Smith was required to give personal service to the company. In other words, he did not have the flexibility to send another plumber of his own choice to fill in for him if he was ill, on holiday, or otherwise unable to attend a particular assignment. He could ask another plumber engaged by the company to carry out the assignment or substitute an external contractor to do the work – but only with the approval of the company. This was not an “unfettered” right of substitution and so was not sufficient to indicate that personal service was not required. Mr Smith’s working arrangements therefore meant he was undertaking to personally perform work for the company, in circumstances in which the company was not his client or customer.

What lessons can employers learn from the case of Mr Smith, the case brought by two Uber taxi drivers and the claim by a City Sprint courier that she was entitled to holiday pay? In all of these cases, the factual background was extremely important. The various contracts, rule books and working arrangements were considered in detail. The courts were not prepared to accept at face value the labels given to the arrangements in the, often convoluted, documentation drafted by the companies’ lawyers. The message is clear: however cleverly an employer dresses up a relationship to make it look as though individuals are self-employed, ultimately the way in which the contract works “on the ground” will determine the question of employment status.

Employers who use self employed individuals may wish to look closely at their own working arrangements as such claims will prove costly in terms of the financial implications for the business and its reputation.

For further help or advice, please contact Angela Gorton on 0113 280 2026 or angela.gorton@luptonfawcett.law