How status of the individual could become the deciding factor in employment rights

16 May 2017

The status of an individual is very important when considering what rights exist in employment law. There are numerous cases considering what constitutes an employee or worker under which piece of employment legislation and many often turn on their specific facts.

How status of the individual could become the deciding factor in employment rights

Mr Smith was a plumber who carried out work solely for Pimlico Plumbers Ltd from 2005.  In January 2011 he suffered a heart attack and Pimlico Plumbers Ltd terminated its contract with him on 3 May 2011 and he consequently issued claims in an Employment Tribunal alleging  among other things, unfair dismissal, wrongful dismissal, unlawful deduction from wages, holiday pay and disability discrimination.  A preliminary issue arose in this case as to his status and if he had the right to make these claims given the nature of the contractual relationship between him and the Company because if he was not an employee or worker, he could not bring these claims in the Tribunal.

The Tribunal specifically looked at the contractual documentation that existed between Mr Smith and Pimlico Plumbers Ltd which expressly stated that he was an independent contractor and he was under no obligation to accept any work or assignment from the company and the company was not obligated to offer him any, however within the company manual there was a clause which stated that he should complete a minimum of 40 hours work a week. 

Mr Smith had to hire and drive a Pimlico Plumbers branded van and wear its uniform, he was provided with a mobile phone by the company, although he provided his own materials and tools.  He was registered for VAT and submitted invoices to the company and filed his tax returns on the basis that he was self-employed.  The contractual agreement between him and the company gave him no right to substitute his work but he could be substituted by another person however the Tribunal found that within the company the plumbers did swap assignments between themselves.  Mr Smith was also entitled to sub-contract to others in relation to specialist work if he had not the necessary skills however this was with the consent of the company.  In addition there was a clause within the contract which prevented him working as a plumber within the Greater London area within a three month time limit following termination of the agreement. 

The Employment Tribunal held that he was not an “employee” for the purposes of the Employment Rights legislation and therefore he could not claim for unfair dismissal or wrongful dismissal or medical suspension pay, however it decided that he was a “worker” as he was personally required to provide work for the company for 40 hours a week and he did not have an unfettered right to substitute, and the company had, in reality, very tight control in most respects over his work and charges.  Therefore he was entitled to bring claims for unauthorised deduction from wages, statutory holiday pay and disability discrimination. 

The company appealed to the Employment Appeal Tribunal but was unsuccessful and then appealed to the Court of Appeal.  The Court of Appeal stated that the right to substitute only when the contractor is unable to carry out the work is consistent with personal performance of a worker– the company argued that in view of the widespread practice of plumbers swapping jobs this was not consistent with personal service.  The Court of Appeal looked at matters of subordination and the extent to which an individual is integrated into the employer’s business and upheld his case that he was a “worker” and his claims were remitted to a Tribunal to deal with these claims.

Businesses should consider carefully the wording of any agreements they have to be clear on the legal status and nature of their agreements to avoid costly and lengthy proceedings.

Maxine Orr is a Partner in Worthingtons Commercial Solicitors specialising in Employment Law.

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