Employment Law Case Update: Pimlico Plumber v Smith
Mr Smith worked for Pimlico Plumbers for five and a half years, until he suffered a heart attack; the contract was terminated four months later. Following this, Mr Smith brought claims to the Employment Tribunal (ET) for unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, unlawful deductions from wages, and disability discrimination.
The ET looked at the contractual documentation that governed the relationship between Pimlico Plumbers and Mr Smith. The documents stated that Mr Smith was an independent contractor, in business on his own account, with Mr Smith stating through his evidence that he considered himself to be an independent contractor. The ET disagreed, and needed to decide whether he was an employee for the purposes of the Employment Rights Act 1996, or a worker for the purposes of the Working Time Regulations 1998.
The ET looked at the reality of the relationship between Mr Smith and Pimlico Plumbers when making their decision. During the course of his employment, there was no obligation on Mr Smith to accept work offered to him and Pimlico Plumbers were not obliged to offer any work. However, there was a provision which stated Mr Smith should work 40 hours a week, he also drove a branded Pimlico Plumbers van, wore Pimlico Plumbers uniform and carried a Pimlico Plumbers ID badge – but he needed to provide his own tools and materials
Mr Smith was also exposed to a large amount of commercial risk; if a customer failed to pay then he would not receive any payment. He was, however, subject to restrictive covenants which prevented him from working as a plumber in the Greater London area for three months following the termination of his contract.
In practice plumbers could swap assignments, and Mr Smith was allowed to bring in external contractors where a job required a specialist contractor but Pimlico Plumbers’ consent was required.
The ET held that Mr Smith was not an employee, but instead a worker and entitled to compensation. Pimlico Plumbers appealed this decision to the Employment Appeal Tribunal and the Court of Appeal who confirmed the ET’s decision.
Pimlico Plumbers were then allowed to appeal to the Supreme Court (SC). The SC dismissed the appeal, holding that Mr Smith was a worker. They held that the ET was correct in finding that the dominant feature of the contract was the obligation on personal performance. They also recognised that the limitations Mr Smith faced when appointing a substitute were significant; the substitute had to be a Pimlico Plumbers operative bound by Pimlico Plumbers obligations.
The SC further found that there was an umbrella contract in place; that Pimlico Plumbers had a contractual obligation to offer work to Mr Smith, but only if it was available, whereas Mr Smith had to be available to work up to 40 hours, five days a week, on assignments that Pimlico Plumbers might offer him.
This case looks at a hot topic in employment law; employment status. Although this decision comes from the Supreme Court, each case relating to employment status will remain highly fact specific. In this case it was the contractual relationship and how the contract played out in reality which was a key factor in determining Mr Smith’s status. This highlights the importance of ensuring contractual terms are clear from the outset and are appropriate for how the relationship between the parties will work in practice.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.