Blurring the lines between employment and self-employment

Louise Connacher, a director in the employment law department at Lupton Fawcett. (S)
Louise Connacher, a director in the employment law department at Lupton Fawcett. (S)

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The Court of Appeal has recently grappled with the tricky question of whether a plumber really was self-employed.

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 for work 40 hours per week; comply with the company’s rule book; drive a company-branded van; use a company-issue mobile phone; and wear a company uniform. Pimlico Plumbers considered him to be self-employed.

Mr Smith had a heart attack in 2010 and asked the company if he could reduce his weekly working time from five to three days. The company refused and terminated his contract. He brought claims for unfair dismissal, wrongful dismissal, holiday pay and disability discrimination.

The Employment Tribunal decided that he was not an employee and therefore could not claim unfair dismissal. However, it decided that he was a “worker” rather than a self-employed individual. Crucially, this meant that he was entitled to claim holiday pay and disability discrimination. Both the Employment Appeal Tribunal and the Court of Appeal agreed with this decision.

Like recent cases brought by the Uber taxi drivers and the City Sprint courier, 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. Factors which can determine that an individual is a “worker” rather than self employed include the following:

• the individual cannot send a substitute of their own free choice to cover for them;

• there is a requirement to wear a uniform, drive a branded vehicle or carry an ID card;

• the company controls the individual’s activities – such as by issuing rules about how they must conduct themselves when dealing with customers; and

• the company demands a minimum number of hours’ availability for work each week.

The stakes are high; individuals who are held to be workers are entitled to a raft of rights including the right to be paid the national minimum wage, the right to holiday pay and the right not to be discriminated against. Now more than ever, companies should have the status of their “self-employed” contractors checked out to ensure that they do not qualify for workers’ rights.

For further help or advice, please contact Louise Connacher, employment director, at Lupton Fawcett. She can be contacted on 0113 2802108 or louise.connacher@luptonfawcett.law.