The Range of Reasonable Responses Newsletter
The problem with Pimlico Plumbers v Smith is that while the most interesting arguments were raised on Mr Smith’s side, it was Pimlico Plumbers who were bringing the appeal.
The Tribunal, the EAT and the Court of Appeal had all held that Mr Smith was ‘in employment’ for the purposes of the Equality Act and was a 'worker' for the purposes of the Employment Rights Act and the Working Time Regulations. They reached that conclusion applying well established principles. Employment status is largely a question of fact and I, along with many other employment lawyers, was surprised that Pimlico Plumbers were given permission to go to the Supreme Court at all. The Supreme Court is only supposed to entertain appeals based on a point of law of general public importance, but Pimlico Plumbers’ argument seemed to be simply that the Tribunal had misinterpreted the contract. In rejecting that argument, the Court did not need to reconsider any of the principles applied by the lower courts. So it was always unlikely that the case would introduce ground-breaking changes in the law on employment status.
Some of the headlines surrounding the case have suggested that the outcome shows a need for some clarification of the law. But in truth the case shows the law working perfectly well. Pimlico Plumbers is simply another case where a business sought to arrange the contracts it had with individuals in such a way that it enjoyed the benefits of an employment relationship without the responsibilities that should go with them. It is true that Mr Smith also enjoyed the tax benefits of self-employed status – but he was rightly held not to be an employee for the purposes of his unfair dismissal claim. It is well established that the right to paid annual leave and the right not to be discriminated against can apply to those who are accepted as ‘self-employed’ for tax purposes.
As I write this we have another employer – this time it is Hermes – acting all surprised when it fails to convince a Tribunal that its workers are not workers at all. It cannot be said often enough that the problem is not that the law is unclear or in need of reform; the problem is that employers keep trying to come up with clever ways of arranging contracts so that the law doesn’t apply to them. When will the message get through that Tribunals just aren’t buying it?
Two issues that 'got away'
There were really two legal issues hanging over the Pimlico Plumbers case neither of which is fully addressed by Lord Wilson (who gave the only reasoned judgment in the case). The first is the issue of personal service. Employment rights of any sort will only apply if the individual is employed under a contract to perform work personally. If the 'employer' doesn't care who does the work as long as the work is actually done, then that is a business contract that falls outside the scope of employment law. Over the years it has been established that a clearly worded 'substitution clause' giving the individual the right to send someone else to do work in his or her place is enough to prevent the individual from being either a worker or an employee.
The problem is that an employer could insert a substitution clause on the assumption that it will not be used often. It will still be a genuine provision of the contract but the employer will continue fore the most part to get the benefit of personal service without technically requiring it. Some commentators have picked up on Lord Wilson referring to the 'dominant feature' of the contract being personal service as suggesting some softening of this rule, but I think that is optimistic. Pimlico Plumbers was arguing that Mr Smith had an implied right to send a substitute - there was no express substitution clause at all - and any substitute he sent had to be another Pimlico Plumber. It is in the context of that vague and limited right to send a substitute that Lord WIlson looks at personal service as a dominant feature of the relationship. There is no suggestion that he is overturning the established rule that a clearly worded substitution clause excludes worker or employee status.
The second issue is whether the definition of employment under the Equality Act is wider than the definition of worker for other employment rights. The basis for this argument is that the Equality Act says that an individual 'in employment' must have a contractual obligation to perform work personally, but unlike the definition of worker, does not contain the additional requirement that the employer should not be a ‘client or customer’ of a business undertaking carried on by the individual.
That difference would suggest, for example, that a freelancer with a variety of clients and customers would be able to bring a discrimination claim against one of them.
However, the courts have held that the Equality Act definition should be read as including the same ‘client or customer’ provision as the Employment Rights Act. We have the European Court of Justice to thank for that. In Allonby v Accrington and Rossendale College (2004) the Court held that the right to equal pay did not apply to ‘independent providers of services who were not in a position of ‘subordination’ to the employer.
That was picked up by the Supreme Court in Jivraj v Hashwani (2011) in holding that a professional arbitrator was not ‘in employment’ under what is now the Equality Act because he was an independent provider of services. As Lady Hale then observed in Bates van Winkelhof v Clyde & Co LLP (2014) this effectively means that the test for employment status under the Equality Act is the same as the test for worker status in relation to other employment rights.
The issue is not completely settled however, and it is clear that Karon Monaghan QC would have argued forcefully for a wider view to be taken in discrimination cases – if it were not the fact that Mr Smith was so clearly not running an independent business on his own account that the Supreme Court didn’t need to address the issue. If a freelancer claims discrimination and loses because he or she has a number of ‘clients or customers’ then the issue may be reopened - but whoever brings that claim will need to have the staying power to take it all the way to the Supreme Court.