When self-employment isn’t really self-employment

The Supreme Court has delivered its judgment in the widely anticipated case of Smith –v- Pimlico Plumbers Limited which deals with the issue of worker status and is expected to have knock on effects for those working in the gig economy and beyond. 

The case concerned Mr Smith who worked for Pimlico Plumbers Limited purportedly as a self-employed plumbing and heating engineer.  Mr Smith signed a contract with the company stating he was to be self-employed and he paid taxes and registered for VAT as a self-employed individual.  However as the Supreme Court (and lower courts and Tribunals previously found) the nature of the engagement was that Mr Smith was in fact a “worker” for the purposes of relevant employment legislation and not a self-employed contractor.

It has long been the case that a label of self-employment will not be determinative of the nature of a working relationship and a Tribunal or Court will look at the particular elements of the relationship as the Supreme Court did in Smith.  Key to the finding that Mr Smith was a worker were the facts that Mr Smith was required to perform services personally and that he was subject to tight controls of the company.  It was also noted in the judgment that the contract Mr Smith signed referred to “wages”, “gross misconduct” and “dismissal” which are all terms inconsistent with self-employment.

The judgement of the Supreme Court will rightly be given consideration in other matters regarding employment status (with high profile cases concerning Uber and other gig economy employers on the horizon).  Whilst cases will be determined on their own particular facts, it is clear that Tribunals and Courts at all levels have no difficulty examining so called self-employment arrangements and making findings in favour of individuals.

Any business making use of self-employed labour should carefully review contracts and working arrangements to ensure they are properly categorising working relationships.  Whilst there may be no immediate issues when things are working well, the case of Smith shows that in the event of a dispute (which may occur many years into an existing relationship) matters can be unravelled.

If you're interested in any of the topics raised in this article, or for further information, please contact Maz Dannourah. Alternatively, you can call to speak to one of the team on 0115 9888 777.

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