Plumbing the depths of employment status as the gig economy gathers steam
Akua Reindorf analyses Pimlico Plumbers v Smith in the Court of Appeal and provides a round-up of employment status reports and inquiries.
Where are we now?
Well over two years have passed since the Employment Appeal Tribunal handed down judgment in Pimlico Plumbers Ltd v Smith. The company’s appeal has now at last been decided by the Court of Appeal.
The CA has upheld the EAT in finding that “operatives” working as plumbers were “workers” for the purposes of a range of statutory employment law provisions. These plumbers were gig workers: held out to the public as an integral part of its workforce, wearing its uniforms, driving its vans, and subject to GPS tracking by its office staff. Yet they were engaged under terms of agreement which defined them as independent contractors, without any redress for breaches of employment law.
In the time between the EAT and CA judgments in Pimlico Plumbers, the gig economy has continued to flourish. Five million people in the UK now work in this rapidly expanding sector. Gig workers are paid on what is essentially a piece-work basis. It is a form of work which is virtually as old as work itself, rearing its head again in an employment landscape increasingly dominated by insecure temporary work, zero-hours contracts and unpaid internships.
To the customer these do not appear to be sub-contractors providing a service on behalf of another company. The customer does not know, and is not supposed to guess, that the delivery cyclist, taxi driver, car valet or plumber in full corporate insignia is not actually part of the business and has no protection against unfair dismissal or discrimination, no right to redundancy payments, no right to the minimum wage or paid holiday and no sick pay.
Gig workers are too often engaged under complex contractual arrangements which are designed to lock them out of employment rights while allowing the business to have its cake and eat it. Access to justice for this inherently insecure workforce is hampered by a chaotic and overcrowded landscape of appellate decisions, and compounded by the chilling effect of the fees regime. But a slew of recent Tribunal decisions have given a glimmer of hope to gig workers that the law is at least capable of redressing the imbalance between worker and employer. The CA’s decision in Pimlico Plumbers is a sign that the appeal courts are – for the time being at least – on board with the direction of travel.
Decisions at the coal face: Uber and CitySprint
In recent years the Tax Tribunals have found that both Weight Watchers meeting Leaders and lorry drivers were employees despite contractual arrangements which presented them to the authorities as self-employed independent contractors.
Similarly, in the much heralded first instance decisions in Uber and CitySprint the Employment Tribunals set aside written contracts and found that taxi drivers and cycle couriers were workers, entitled to the legal protections available for those who operate in the gap between self-employment and employee status.
None of these cases breaks new legal ground. They go no further than the principles set out in 2011 in Autoclenz v Belcher, in which the Supreme Court rejected the idea that a sham contract only exists where both parties intended something other than what was written. Tribunals should instead look for the “actual legal obligations of the parties”, using a purposive approach which considers all the circumstances of the case and takes into account in particular the relative bargaining power of the employer and worker. The written contract is only part of the picture.
In that spirit the ET took Uber to task on the “twisty” wording of the contract it imposed on its taxi drivers, which bore “no relation to reality”. The idea that the drivers were in fact self-employed contractors was “faintly ridiculous”. During the periods when they were logged on and ready to work, the drivers were workers within s.230(3)(b) of the Employment Rights Act 1996, and by extension the National Minimum Wage Act 1998 and the Working Time Regulations 1998.
In CitySprint the labyrinthine document which cycle couriers were required to sign – which was named “Confirmation of Tender to Supply Courier Services” – was not a true reflection of the working relationship. Any suggestion that the Claimant was an independent contractor was a sham. The contract contained a “contorted and self-destructive” substitution clause, but this was so prescriptive that it was never exercised in practice and did not negate the fact that she was required to provide personal service to CitySprint. When logged on and on circuit, she was a worker within s.203(3)(b).
What these recent cases manage to do is to grapple head-on with the reality of gig work, where workers do usually have at least a nominal flexibility in deciding on their working patterns and frequency. Rather than allow that lack of overarching mutual obligation to defeat any claim to the protection of employment law, the Tribunals in Uber and CitySprint decided that although there was no “umbrella” contract, the individuals were workers during the periods when they were logged on and either working or on standby. As the Employment Judge said in Uber: “they also serve who only stand and wait”.
But these conclusions are hard to square with the earlier CA decision in Windle v Secretary of State for Justice, which was concerned with the Equality Act 2010 variant of worker status. That case suggests that the nature of the relationship between assignments can shed light on the character of the relationship as a whole. It was said that the absence of an umbrella contract could indicate that that there was in fact no personal obligation.
Of course, neither Uber nor CitySprint is binding authority. Uber have already lodged an appeal to the EAT, and it remains to be seen whether CitySprint will follow suit. Both will be studying the Court of Appeal decision in Pimlico Plumbers carefully.
The latest proclamation: Pimlico Plumbers in the Court of Appeal
In Pimlico Plumbers in the EAT, HHJ Serota concluded that Mr Smith was not an employee within s.203(3)(a) ERA. Having conducted an exhaustive review of the case law, he felt that “at the end of the day … the relationship simply does not look anything like a contract of employment”.
But he did find that the plumbers were workers. This was not a case like Uber or CitySprint in which the written contract had to be set aside on the basis that it did not reflect the true nature of the relationship. The key issue here was whether there was an obligation to provide work personally despite the business’ assertion that the plumbers could send substitutes to work in their place. The judge found that there was no real right to substitute: the company was willing at most to tolerate a form of job-sharing or shift-swapping amongst its existing plumbers. That was not enough to negate worker status, and the question of where the boundary lay between a fettered and unfettered right of substitution should now be interpreted more generously to the worker than before.
Rejecting Pimlico’s appeal in the CA, Sir Terence Etherton MR (with whom Davis LJ and Underhill LJ agreed) has now held that the ET made adequate and relevant findings of fact and then “stood back and asked and answered the over-arching question” of whether Pimlico was a client of the plumbers in business on their own account, or whether the better conclusion was that the plumbers were an integral part of Pimlico’s operations and subordinate to it. There was no error of law in the ET’s conclusion that Mr Smith was a worker.
On the question of substitution the Master of the Rolls agreed on the facts that Mr Smith had no unfettered right to send another person in his place, and that his was therefore giving personal service a workers. He found that such a right “was not so obvious that it went without saying” and it was not necessary to imply such a right into the contract to give it commercial or practical coherence.
Helpfully, paragraph 84 of the Master of the Rolls’ judgment offers a five point guide on the subject of substitution. This can be boiled down to two bullet points:
A person is not giving personal service if he has an unfettered right to substitute, or if the right of substitution is limited only by the need to show that the substitute is as qualified as the contractor to do the work, whether or not that entails a particular procedure.
A person may be giving personal service if he has a conditional right to substitute, depending on the contractual arrangement and in particular the extent to which the right of substitution is limited or occasional. For example, it is consistent with personal service for a right of substitution to exist only when the contractor is unable to carry out the work, or where the right can be exercised only with the consent of another person who has an absolute and unqualified discretion.
The Master of the Rolls also rejected the employer’s argument that the plumbers had not been working under an “umbrella” contract, confirming the ET’s decision on the facts. Commenting briefly on the Windle decision, the Master of the Rolls noted that there is no “single touchstone” on the question of worker status. The question of whether the worker has obligations to the employer between assignments is a relevant factor.
It must be said that the CA’s judgment is unsurprising. Nonetheless it is a helpful step forward for atypical workers, who may now add this appellate authority to the arsenal of favourable first instance decisions which is steadily building up. But it is perhaps time to stop troubling the courts with this merry-go-round of employment status cases and move instead to a better, clearer and more predictable set of statutory definitions. It is to be hoped that a new approach is born from this year’s flurry of inquiries and reviews into the problems posed by the move towards atypical and, in many cases, asymmetrical working relationships.
Where are we going? Inquiries and reviews round-up
The DBIS Employment Status Review and the Taylor Review
The Department for Business, Innovation and Skills has put into the public domain an “Employment Status Review” which was completed in December 2015. Notwithstanding its advanced age, this report has been published in order to inform the work of the Independent Review of Employment Practices in the Modern Economy, commissioned by the Prime Minister in October 2016 and chaired by Matthew Taylor.
The Taylor Review is intended to consider the implications of “new forms of work, driven by digital platforms”. It is said that the Prime Minister would like to know how employment practices need to change to keep pace with modern business models. Again, there is an online forum for contributions and there will be hearings around the UK.
It is to be hoped that the Taylor Review sees the elephant in the room that the Employment Status Review is blind to: namely the impact of the Employment Tribunal fees regime on access to justice. There is no mention of fees in the Employment Status Review; indeed, it is said that the Employment Tribunal “will always provide a safety net”. That statement must be called into serious doubt by the evidence of our own eyes as well as by the Government’s cursory review of fees which is a dispiriting indication that the fees regime is here to stay.
Without access to justice, the Tribunals can continue to frown from on high on convoluted contracts contrived by armies of lawyers to disadvantage atypical workers, but there is little to no disincentive for unscrupulous employers trying to game the system and find ways around the case law.
In other respects the Employment Status Review is similarly discouraging. It concludes that the law on employment status is appropriately flexible and largely fit for purpose, advocating the “principles-based approach” adopted in case law. Others may feel that the messy patchwork of ever changing, fact-sensitive authority offers little by way of clarity or reliability.
It seems that, with a sigh of resignation, the DBIS Committee reached the view that any significant change – or even “small tweaks” – would be too complicated, time-consuming and unpredictable to even try to achieve.
The Wright inquiry
The Future World of Work and Rights of Workers inquiry was launched in October 2016 by the Business, Energy and Industrial Strategy Committee, chaired by Ian Wright. The remit of the inquiry is to focus on “the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the 'gig economy'”. The stated aim is to help the Government deliver “a vibrant, dynamic, innovative economy with laws that deliver the benefits of flexibility but which prevent exploitation”.
The Future of Work Commission
Finally, the impact of technological change on the world of work is again the focus of the Tom Watson MP and Helen Mountfield QC’s Future of Work Commission, due to report in September 2017 with a set of “achievable policy recommendations”.
The Commission has wide ranging terms of reference, incorporating matters like the impact of Brexit and protectionism and the low wage economic model. Public evidence sessions have begun. Members of the public and stakeholders are encouraged to get involved.
 UKEAT/0495/12/DM, 21 November 2014
 Weight Watchers (UK) Ltd v Revenue and Customs Commissioners  STC 265, Upper Tribunal (TC)
 RS Dhillon and GP Dhillon Partnership v HMRC ( UKFTT 017 (TC)
 Dewhurst v CitySprint UK Ltd (Case 2202512/2016, 5 January 2017)
  UKSC 41
  ICR 721