Worker status: a decidedly "leaky" definition

It seems that not a month goes by at the minute without some sort of mention of employment status and this month is no different. The Court of Appeal has just handed down judgment in the case of Pimlico Plumber Ltd v Smith, finding that, despite being described as self-employed, Mr Smith was in fact a worker and so entitled to worker rights. Historically, case law has focussed very firmly on questions of employment versus self-employment, and this case highlights yet again that in many ways the battleground now is much more around self-employment vs worker status. It was very clear on the facts that Mr Smith was not an employee, but the worker issue was much more nuanced.

As so often happens in these cases, the actual decision was very fact specific – Mr Smith was VAT registered and paid tax on a self-employed basis. However, Pimlico allowed him use of a company branded van, controlled the number of days he worked and Mr Smith worked solely for the company for six years without ever providing a substitute. The Court of Appeal held that this case "puts a spotlight on a business model under which operatives are intended to appear to clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker. Once again, beware the "sham contract": it is the reality of the contract on the ground that matters and not necessarily the label given to it by the parties.

What is clear is that, particularly with the rise of the so-called "gig economy", the legal cases on this issue will keep coming thick and fast and if anything the Court of Appeal has just opened the door to many more. It behoves employers to continue to focus very carefully on the actual day-to-day relationship they may have with self-employed contractors. The risks of getting it wrong can have a significant impact on employers (from tax penalties to claims for backdated holiday and sick pay). Increasingly, employers may want to consider whether these risks continue to outweigh the benefits of engaging someone on a self-employed basis or whether an alternative approach, such employing someone on a short-term employment contact, may be preferable.

Interestingly, the case has also come at a time when the issue of worker status is very much on the Government's agenda. The Department of Business, Energy and Industrial Strategy has published a report called "Employment Status Review" which acknowledges that determining status isn't always a simple calculation and sets out a number of what it acknowledges are fairly radical proposals for dealing with the issue (including, at the extreme, a rebuttable presumption of employee status). The "Independent Review of Employment Practices in the Modern Economy" was also launched at the end of last year and is tasked with considering issues such as the scope and rights of that elusive category of worker. No doubt it will take the Court of Appeal's decision into account when reviewing this. So watch this space: 2017 looks set to be the year of the worker.