Gig economy: informal and flexible – but who has what rights when it all goes wrong?

In the recent judgment in Pimlico Plumbers Ltd and another v Smith [2018] UKSC 29, the Supreme Court ruled that a plumber who paid tax as a self-employed contractor was a worker with rights to bring Employment Tribunal claims outside the contract. Jean Sapeta explains why and what it means for you.

Charlie Mullins built Pimlico Plumbers , a £70 million domestic maintenance business, on the back of a self-employed model. This summer PP lost a court battle in the Supreme Court over the status of its workers. PP said they were self-employed; the Supreme Court ruled they were workers. This is the first time the Supreme Court has considered workers’ rights in the growing gig economy. Why did PP lose?

The techy bits first – there are three possible relationships a person can have with providers of work (“employers”) -self-employed contractor; employee working under a contract of service; and worker – a middle category – neither of the above but a mix of both. Employees have most rights and are therefore the most expensive potentially but are under the greatest control. Workers have some but not as many rights as employees (e.g. paid annual leave; protection from unlawful deductions; protection from discrimination).

Self-employed contractors have no employment rights but retain a high level of discretion about how the work is performed. Some people like the freedom and flexibility of being self-employed, as well as the advantageous tax regime under schedule D.

Gary Smith who brought the case worked for PP for five years from 2005 to 2011. When he suffered a heart attack in 2010, he claimed he should be entitled to sick pay and asked to cut his week down to three days from five. He brought a claim for disability discrimination in the Employment Tribunal. He argued he was entitled to basic workers’ rights, which also include the national minimum wage and paid holiday.

Previously he had considered himself as self-employed. He had looked after his own tax on a trading basis and registered for VAT. He provided his own tools and equipment; he had to be insured and was responsible for the quality of his work. In his last year of work, he set off expenses of £82,454 against receipts of £130,753. Thus far, he looks like a self-employed contractor.

There were some odd features of the contract with PP. He had to undertake 40 hours work a week himself. There was a very limited right to send another plumber to do a job if he had quoted for it and no longer wanted to do it. He had to drive a PP branded van (with a tracker) which he had to “hire” from PP and wear a PP uniform which he had to keep clean and smart. His contract referred to “wages”, “gross misconduct” and dismissal”.

The Supreme Court decided that the dominant feature of the contract was that Mr Smith had to do the work himself. He could send another plumber, but that person had also to be under contract with PP. He therefore undertook to do the work personally.

Mr Smith also had to show PP was not his client or customer. Key to this was whether he was an integral part of PP , subordinate to it and acting according to its direction. The Supreme Court noted Mr Smith’s services were marketed through PP, he was under tight administrative conditions, and PP imposed fierce conditions as to how he was paid. He was also restricted from competing with PP once he had left. That was not a client / customer relationship.

For these reasons he was a worker not a self-employed contractor and can now continue with his claims against PP.

What’s the lesson? Each case is fact specific. If the contracts do not mirror the reality of the relationship on the ground, the courts will look behind the paperwork and examine the facts. If the relationship is not truly with a freelance or gig worker despite what the documentation says then individuals may unexpectedly have greater rights and more protection than a true self-employed contractor.