Who is a worker? The distinction between employee and worker: employment status

The latest claim exploring the distinction between an employee and a worker has been issued in a judgment from the Supreme Court.

Several claims from individuals, recruited as self-employed, platform workers and on less traditional working patterns, challenging employment status are in the courts and at appeal level. Many are concern rights as workers with individuals seeking to benefit from legal protection: such as the right to paid annual leave, discrimination rights or whistleblowing. These cases continue to be important and relevant as the range of working practices evolve and change - even before new legislation is introduced by the Government in response to the Taylor review (see previous article here).

The latest claim exploring the distinction between an employee and a worker has been issued in a judgment from the Supreme Court: Pimlico Plumbers Ltd and another v Smith.

The claim and its history

Mr Smith brought claims, dating back to 2012, claiming unfair dismissal rights as an employee under the Employment Rights Act 1996 (ERA), rights under the Working Time Regulations 1998 and wage deduction provisions as a worker, and a claim of disability discrimination under the Equality Act 2010 (Eq Act).

The Employment Tribunal found that he was not an employee but concluded that he was a worker and therefore could proceed with his deduction holiday pay and disability discrimination claims.

Under the Equality Act, an individual gains rights if in “employment”, which is defined very broadly to include an individual employed under a contract of employment, of apprenticeship or under a contract personally to do work. It does not use the term worker, nor adopt the same definition to carve out a party who is a client or customer (which is explicit in the worker definition elsewhere). The Supreme Court confirmed that the wider meaning of employee under the Equality Act is no different from the meaning of worker. The court did however reflect on the fact that it is “regrettable that in this branch of the law the same word [employee] can have different meanings in different contexts contrasting the ERA with the Eq Act terms. It also acknowledged that given its findings different words (employee/worker) “can have the same meaning”.

Pimlico had appealed to the Employment Appeal Tribunal and then the Court of Appeal on the worker findings and Eq Act point: Mr Smith had cross appealed the finding that he was not an employee. Pimlico brought a further appeal to the Supreme Court.

The key questions

Was Mr Smith a worker at Pimlico plumbers or could he be regarded as an individual providing services to a customer or client (to Pimlico)? The court looked at the contractual arrangements but also the underlying practical working arrangements.

Much of the focus in the Judgment is on the key elements of personal performance, indicative of worker status. This was weighed against the question whether there was a right to substitute, and whether right to substitute could be regarded as consistent with personal performance obligations. Although the original Tribunal found that Mr Smith did have a limited ability to substitute, the Supreme Court agreed with the assessment that because this was constrained and had to be done through using another Pimlico operative - suitably authorised and compliant with Pimlico controls - a right substitution of this nature, was not inconsistent with personal performance.

When exploring the question whether Pimlico could be regarded as Mr Smith’s client or customer, such that he could therefore not rely on the worker protection and fell outside that definition, ( although he operated on a self-employed basis, including being registered for VAT) there was significant direction and control by Pimlico; this included clear terms and a manual on company procedures and working practices, requiring him to wear a Pimlico uniform, drive a branded van with a tracker, have an identity card and follow the administrative instructions of the control room. This was said to be in stark contrast with the situation where someone would not be under this type of direction and not a subordinate, who would fall outside the regime and have greater freedom to choose the time, place, content of his work and/or carry some form of commercial risk.

Conclusions

Undoubtedly this will not be the last word that we hear on this subject. There are other appeals being brought and legal challenges exploring similar arguments.

One of the Government proposals from its Modern Working Practices consultation, is to put the employment status tests and the key requirements on a statutory footing: this becomes more challenging with the increasing amount of case law in this area.

The Judgment illustrates again that the operating practices as well as contractual arrangements need to be considered in the usage and engagement of atypical workers and those who are not intended to be employees.

We will be monitoring developments and the changes proposed (as well as the appeals) and running webinars on these proposed changes.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.