What’s Going On Here?
After appeals from the Employment Tribunal and Court of Appeal, the UK Supreme Court has ruled that Mr Smith, a former plumber, was an employee and not self-employed.
What Does This Mean?
Individuals are entitled to different benefits depending on whether they are treated as an employee or self-employed. In addition to protection from unfair dismissal, an employee is entitled to paid annual leave and sick pay. Self-employed workers are not entitled to these benefits.
Mr Smith alleged he had been unfairly dismissed by Pimlico Plumbers in 2011. Unless if he was an employee, Smith could not have the protection of the unfair dismissal legislation to bring such a claim.
Why Should Firms Care?
There is no definition of a self-employed worker, and thus to determine an individual’s employment status, the Courts will assess the facts on a case-by-case basis. The judgment of the Supreme Court will bind lower Courts, so the factors they relied upon are likely to create an important precedent.
Smith’s employment contract referred to him as ‘self-employed’, but this was not treated as a definitive answer. Clever contractual drafting did not stop the Court finding that Smith was actually an employee.
A number of factors suggested that Mr Smith was self-employed; he paid tax himself rather than having it automatically deducted from his wages and had the opportunity to refuse work.
However, the Supreme Court felt that the most important factors were that Smith had to wear a branded uniform and drive a branded van. Smith’s contract prevented him offering his services to competitors, and Pimlico Plumbers set Smith’s hours of work and his level of pay. All of these factors illustrated a high degree of control by Smith’s employer, suggesting that he was, in reality, an employee.
The fact-specific nature of the decision means that uncertainty remains in relation to the ongoing litigation within the gig economy. If Uber drivers and Deliveroo cycle couriers are treated as employees who are entitled to additional benefits and the minimum wage, this may create severe financial implications for those companies and cause problems for the operation of their business model.
Law Firms may begin to advise their clients to restructure their working practices, or modify their existing contracts to ensure they reflect the reality of the employment relationship. Law Firms may also rely upon the factors used by the Supreme Court to assist clients who are seeking advice on how to ensure their workers would be classified as either self-employed or as employees.
Article written by Rebecca B.
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