Being self-employed is generally considered a great freedom giver. Being your own boss and determining when and who you work for and for how much is pretty much the dream! But when the self-employed start entering into contracts with businesses, do they stop being ‘self-employed’?

Recently a claimant, Mr Smith successfully argued in the Court of Appeal (CoA) that he was a ‘worker’ rather than a self-employed contractor. The distinction of status as a worker is important; it entitles a person to some of the employment rights enjoyed by employees. Being a self-employed contractor usually means foregoing these rights. In this case, it meant Mr Smith was entitled to paid annual leave, protection from unlawful deductions from wages, and protection from discrimination.

So what happened?

Pimlico Plumbers enlisted Mr Smith as a plumber for approximately five and a half years. In 2009, he signed a self-employed agreement, which required that he:

• Be responsible for the personal performance of his services
• Be unable to send a substitute in his place.
• Restrict his business activities for 12 months after the end of the agreement as part of a covenant.
• Comply with all reasonable rules and policies of the company, including those contained in the company working practices manual, including:
  a) A requirement to work 40 hours per week.
  b) A requirement to wear a Pimlico Plumbers uniform and drive a van leased from the company.

Mr Smith provided his own tools, professional indemnity insurance and was registered for VAT. He submitted invoices to Pimlico Plumbers and filed tax returns on the basis that he was self-employed.

Approximately four months after Mr Smith suffered a heart attack, the company terminated the agreement. Subsequently he brought a claim to an employment tribunal (ET) against Pimlico Plumbers. He claimed unfair and wrongful dismissal (as an employee), and, unlawful deductions along with unpaid holiday pay and disability discrimination (as a worker).

The ruling

The ET found in favour of Mr Smith. He was in fact a worker within the meaning of the Employment Rights Act 1996 (ERA) and not a self-employed contractor.

The ERA defines a worker as an individual who has entered into or works under (or, where the employment has ceased, worked under):

• A contract of employment.
• A contract where the individual agrees to personally perform work for another party, but it cannot be said that the other party is a client or customer of the individual. A contract in this situation may be express or implied and it may be verbal or in writing, so it does not need to be in the form of an express written contract.

The CoA, who also highlighted that Mr Smith was required to personally perform services for Pimlico Plumbers, upheld the decision. It agreed with the finding of the ET. The ‘degree of control’ exercised by Pimlico Plumbers in the 2009 Agreement was ‘inconsistent with the company being a customer or client’ run by Mr Smith.

What does this mean now?

The CoA confirmed that cases such as these are fact specific and don’t form a tick box list. However, the decision does serve as useful guidance on the question of worker status.

The judgment emphasises that tribunals and courts will carefully scrutinise contractual documentation entered into by involved parties and consider it against the reality of the working arrangement.
Given that CoA decisions are binding on lower courts, this case is an important step. It is likely to be relied upon to argue similar cases in the future.

Prior to making any decisions in relation to employment law issues, you are advised to seek advice relating to your circumstances. If you would like to discuss this or any other employment law issues with us, please call Jelf Risk Management on 0345 040 0002 and ask for the Employment Law Team for more information.

Source: https://uk.practicallaw.thomsonreuters.com

JIB112.04.17

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