Self-employment in the gig economy

Two recent cases demonstrate that a contract which states that an individual is self-employed will be overlooked if it does not reflect the reality of the situation.

Pimlico Plumbers & Charlie Mullins v Gary Smith

Mr Smith carried out plumbing services for Pimlico Plumbers. His job title was: “Self-Employed Operative” and his contract described him as an independent contractor. The company argued that Mr Smith was self-employed and so not entitled to claim unfair dismissal or holiday pay.

While, in this particular case, the Claimant fell short of satisfying the test required in order to be deemed to be “an employee”, he was deemed to be a “worker” rather than “self-employed”. He was therefore not entitled to claim unfair dismissal but he did have certain basic rights such as the right to holiday pay.

The key factors in the Court of Appeal determining that he was a worker included that there was:

• an obligation of personal performance;
• a requirement to work a minimum number of hours; and
• a degree of control exerted by the company over Mr Smith’s work.

The judgment stresses that contracts which do not reflect the reality of the relationship will not be relied upon.

Boxer v Excel Group Services

Mr Boxer was engaged by a courier business and supplied with a radio and palm computer, which was later replaced by an app on his phone. He was able to appoint a substitute to take his place to carry out each assignment, but subject to the business being satisfied that the substitute had the required skills, qualifications and licenses.

Relying on the guidance from the Pimlico Plumbers case, the Tribunal concluded that the courier was a “worker”, so he was entitled to holiday pay.

The Tribunal decided that, in reality, given that the particular delivery was almost always required immediately, the right to substitute was “irrelevant”. The reality of the situation was that he was required to perform the work personally and he was a worker rather than being self-employed.

Our view

The determination of employment status will be a largely fact sensitive matter. The Pimlico Plumbers case is the highest recent authority on the issue of employment status and, as seen in the Boxer case, its guidance will be followed by the Employment Tribunal.

Employment status is important to the gig economy, which heavily relies on “self-employed” people. Most famously Uber drivers successfully argued that they were workers and entitled to holiday pay. However, the two cases above, involving couriers and plumbers, demonstrate that the potential areas for challenge are not restricted to modern phenomena such as Uber.The appeal of the Uber decision is expected to be heard this year.

Organisations should consider both the wording of the written contract and how the relationship works in practice if they are to avoid inadvertently “employing” those who they merely wished to engage as self-employed contractors.