Leslie Millin looks at Pimlico Plumbers Ltd & Mullins v Smith

1) Pimlico Plumbers Limited 2) Charlie Mullins -v- Gary Smith Court of Appeal [2017] EWCA Civ 5

Employment Status

Pimlico Plumber’s appeal in the Court of Appeal rejected by Sir Terence Etherton MR. The Court of Appeal confirmed that Mr Smith was a worker.

The Court of Appeal handed down their judgment last Friday after considering whether the Employment Tribunal was correct to hold in a decision dated 16th April 2012 that the respondent, Gary Smith, was a worker within the meaning of section 230 (3) (b) of the Employment Rights Act 1996 (the ERA)and regulation 2 (1) of the Working Time Regulations 1998 (the WTR) and his working situation fell within the definition of employment in section 83(2)(a) ofthe Equality Act 2010 (the EA) during the period that he worked for Pimlico Plumbers, the first appellant.

Mr Smith was a plumber and worked for Pimlico Plumbers (PP) between 25th August 2005 and 28th April 2011. He claimed that he was unfairly or wrongfully dismissed on 3rd May 2011 following a heart attack in January 2011. Mr Smith signed an agreement with PP on 25th August 2005. In this agreement he was described as ‘the sub contracted employee’. PP was described as ‘the Company and the terms of the agreement were set out in the Company Procedures and Working Practice Manual. This was later replaced by a longer and more detailed agreement on 21st September 2009, which Mr Smith countersigned.

After the 2009 Agreement with pp was terminated, Mr Smith made a claim in the ET .He complained of unfair dismissal, wrongful dismissal, pay during medical suspension, holiday pay and arrears of pay. He also claimed direct disability discrimination, discrimination arising from disability and failure to make reasonable adjustments.

The ET concluded that Mr Smith was not an employee. He had accepted that he did not have that status both in the 2009 Agreement and in evidence. In addition, there were circumstances when pp had no obligation to pay Mr Smith for work done. He also employed an accountant and claimed tax advantages as being self-employed. He was VAT registered.He bore a financial risk which was inconsistent with that of an employee in that he may not get paid and paid for materials in advance. The ET did find however that Mr Smith was a worker within s 230(3} of the ERA and that his working situation fell within the definition of employment in section 83(2}(a}of the EA. The reasons were:

  • The main purpose of the agreement was for Mr Smith to personally provide work for PP
  • Mr Smith’s contract required him to provide work on the days agreed with PP
  • PP expected plumbers to agree their working hours with them and therefore sufficient obligation
  • There was not an unfettered right to substitute at will
  • PP exercised very tight control outside work done and estimates
  • pp was not a customer/ client of Mr Smith but could be regarded as a principal. He was subordinate to PP. He was not in business on his own account.

The ET found that it did not have jurisdiction to consider the claims for unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension and failure to provide particulars of employment. It did have jurisdiction to consider his complaints of direct disability discrimination, failure to make reasonable adjustments, holiday pay and unauthorised deductions from wages.

Mr Mullins and pp appealed and HHJ Se rota concluded that the ET correctly arrived at the decision that Mr Smith was not an employee but a worker and dismissed the appeal. Mr Mullins and pp appealed to the Court of Appeal.

Sir Terence Etherton MR (with whom Underhill U and and Davis U agreed) rejected the appeal. He set out the applicable principles for personal performance in paragraph 84 of his judgment regarding substitution and stated that the ET was correct in their finding that Mr Smith undertook to provide his services personally under the 2009 agreement within section 230(3)(b) of the ERA, regulation 2 of the WTR and the definition of employment in section 83 (2) of the EA. Criticisms of the ET’s decision were not accepted by the CA who were in agreement with the reasons set out above. Also mentioned were the onerous restrictive covenants which precluded Mr Smith from working as a plumber in any part of Greater London for three months after termination of the 2009 Agreement which again supported the fact that Mr Smith was not self- employed and finally the ‘over – arching question of whether pp was a client or customer of Mr Smith’s business or rather that pp should be regarded as a principal and Mr Smith was an integral part of PP’s operations and subordinate to

  1. The CA confirmed that the ET’s conclusion that it was the latter was correct.

This decision of the Court of Appeal confirms that employers should beware when drafting contracts as on numerous occasions, the ET has looked behind the contract to ascertain exactly what the person carrying out the work is actually doing and if in reality the requirement is for personal service, if the company exerts control over the person, if the person receives pay slips even though they submit invoices and have signed an agreement which imposes restrictive covenants, then even ifthe person carrying out the work has agreed to label of ‘self- employed’, submits VAT returns, is taxed as self- employed and claims tax advantages it is likely that the ET will find that the person is a worker and will be entitled to holiday pay and various other advantages not enjoyed by the self employed .Workers are also entitled to bring certain claims in the ET for example, claims for disability discrimination, holiday pay and unauthorised deductions of wages .It has been said that employers should ensure that their contracts are tightly drafted but in fact it is the work carried out and how it is carried out which is of more importance, together with matters such as control and restrictive covenants. The self -employed are free to operate without restrictions whereas employees and workers are not.

See also Baillie & Gillard v Inex Home Improvements Ltd ET 1302646/14 & ET 1302647/14 where the Birmingham Employment Tribunal found that two construction workers were not self- employed but were workers (reported on Ely Place web site)

13th February 2017