(1) Pimlico Plumbers Limited and (2) Charlie Mullins v Gary Smith  EWCA Civ 51
A plumber who carried out work for Pimlico Plumbers as a purportedly self-employed operative was held to be a “worker” under the Employment Rights Act 1996 and Working Time Regulations 1998, and was held to be in “employment” under the Equality Act 2010.
The claimant, Gary Smith, undertook plumbing work for Pimlico Plumbers between 2005 and 2011. He signed two contracts, in August 2005 and September 2009, in which he was described as a “sub contracted employee” and “self-employed operative”, respectively. Under these successive contracts, he provided his own tools, was responsible for his own tax and VAT, was responsible for his own insurance, and bore his own expenses. There was no obligation for the company to offer him work or for him to take up work. However, Mr Smith was required to wear company uniform, had minimum working hours, was required to give notice of holiday, was not permitted to contact customers directly, and was not permitted to undertake work in competition with the company.
Mr Smith’s contract with Pimlico Plumbers was terminated in May 2011. A few months prior to this he had suffered a heart attack. Mr Smith brought an Employment Tribunal (“ET”) claim against Pimlico Plumbers alleging wrongful or unfair dismissal, and also claiming pay arrears, holiday pay, and pay during medical suspension. Mr Smith further alleged disability discrimination against Pimlico Plumbers and its owner and founder Mr Charlie Mullins; in particular alleging direct discrimination, discrimination arising from disability, and failure to make reasonable adjustments.
The Employment Tribunal judgment
A pre-hearing review was held on 16 April 2012 to determine whether the Employment Tribunal had jurisdiction to hear the claim. Employment Judge Corrigan held that Mr Smith was a “worker” rather than an “employee”, pursuant to section 230(3) of the Employment Rights Act 1996 and regulation 2(1) of the Working Time Regulations 1998, and therefore the tribunal had no jurisdiction to hear the pay and dismissal claims. He was a worker as the purpose of the contract was for him to personally provide the company with services, and the company exercised a large degree of control over him. Mr Smith was held to be “an integral part of [Pimlico Plumbers’] operations and subordinate to [Pimlico Plumbers]…[h]e was not in business on his own account”. Employment Judge Corrigan also held that Mr Smith was in “employment” under section 83(2)(a) of the Equality Act 2010, and therefore there was jurisdiction to hear the discrimination claims. Mr Smith was not an “employee” as there was insufficient obligation on Pimlico Plumbers to provide Mr Smith with work or pay him.
The Employment Appeal Tribunal judgment
Both respondents appealed to the Employment Appeal Tribunal (“EAT”) on the basis that Mr Smith was not a “worker”. Mr Smith cross-appealed on the basis that he was an “employee” rather than a “worker”. On 21 November 2014, HH Judge Serota QC, sitting in the EAT, upheld the ET decision. He held that there was tension between the company’s two objectives of treating Mr Smith as self-employed for business purposes, yet wishing to present to the public that he was part of the workforce.
The Court of Appeal judgment
The respondents appealed against the EAT decision to the Court of Appeal. In a judgment handed down on 10 February 2017, Sir Terence Etherton MR, Lord Justice Davis and Lord Justice Underhill unanimously agreed that the appeal should be dismissed. Thomas Linden QC, for the respondents, contended that Mr Smith was not a worker, because, inter alia, he did not have a personal obligation to do work as he had the right to substitute in another worker, and also because Pimlico Plumbers was actually a client or customer of Mr Smith. The Master of the Rolls, in the leading judgment, held that whilst an unfettered right to substitute another person was inconsistent with a contract to do work personally, a conditional right to substitute may be consistent with a contract to do work personally, depending on the conditions. On the facts of the case, he held that there was no express or implied term granting Mr Smith unfettered discretion to substitute in another operative to do his work.
In terms of whether Pimlico Plumbers was a customer or client of Mr Smith rather than him being their worker, the Master of the Rolls held that the ET was required to conduct an evaluative exercise on all relevant facts (Hashwani v Jivraj  UKSC 40) with no single focal point, for example on subordination (Bates van Winkelhof v Clyde & Co LLP  UKSC 32). Subordination was relevant, as were whether obligations continued between individual assignments, and the level of integration into the company. The ET did not make an error of law in carrying out its evaluation, contrary to Mr Linden’s submission. It was right for the ET to place weight on the onerous restrictive covenants. Also, the ET was not wrong to find that there was a contractual term requiring Mr Smith to work a minimum number of hours; it did not conflict with there being no obligation on the company to provide work or on Mr Smith to accept work, as Mr Smith could not refuse all jobs. The fall-back argument that if the written agreement reflected a minimum number of hours, it was not what was actually agreed and should be ignored according to Autoclenz Ltd v Belcher  UKSC 41, was dismissed. The evidence was clear that the arrangement could only work for both sides if there were a minimum number of hours each operative could work. Mr Linden’s contention that Mr Smith was not subject to one overarching agreement was unsuccessful; the Master of the Rolls held that the company’s Working Practice Manual, which contained the provision as to minimum working hours, was incorporated into the 2005 contract, and still applied to the 2009 contract. Overall it was held that, given the findings of minimum working hours and no unfettered right to substitute in other operatives, the degree of control exercised by the company was inconsistent with the company being a client or customer of Mr Smith.
As stated by the Master of the Rolls at paragraph 3 of the approved judgment, the case highlights a business model whereby individuals appear to clients that they work for the business, but the business maintains that such individuals are independent contractors. This business model is often used by companies operating through smartphone “apps”, so may become increasingly common.
Whilst the case was largely decided on the facts, it indicates that the court will look to the reality of the relationship between the company and its operatives, rather than any impression the company wishes to give, or any arrangements made due to the company’s business model. In Pimlico Plumbers, the level of control that the company had over Mr Smith was key; whilst the contracts purported to give Mr Smith independence, the practical reality of the situation was that Mr Smith was subject to many restrictions and was subordinate to the company.