Whilst many IR35 court cases usually follow an accused ‘disguised employee’ arguing that they are in fact self-employed, this case took a different direction.
The landmark IR35 ruling has had a significant impact on the definition of what is considered a ‘worker’, meaning the wrongly-classified ‘self-employed’ plumber should have been entitled to a number of employment rights by the company he was working for.
What was the case about?
Mr Smith worked as a plumber for Pimlico Plumbers between 2005 and 2011 with his contract stating he was self-employed. He wore the Pimlico branded uniform and drove a Pimlico van which he leased from the company.
Following a heart attack in 2010, Smith asked Pimlico to change his working week to three days instead of five. Pimlico promptly refused his request, taking back their van and terminating his contract.
Smith appealed to the employment tribunal claiming that he was unfairly dismissed. This was refuted by the company under the premise that he was self-employed and not an employee of Pimlico. The court made a preliminary finding that he was in fact a worker, as defined by the 1996 Employment Rights Act.
Pimlico, unhappy with the court’s decision, then appealed the ruling. They maintained that he was a ‘self-employed operative’, taking the case to the Supreme Court.
Gary Smith Vs Pimlico Plumbers Ltd.
The court heard that Mr Smith filed his own tax returns each year, was himself VAT registered, and was entitled to both reject work and take outside work from other businesses.
All of these aspects point towards a self-employed person, however the Supreme Court upheld the employment tribunal’s decision that Mr Smith was in fact a ‘worker’.
Let’s take a look at how they came to the decision:
- Mr Smith was required to wear a Pimlico uniform whilst completing work.
- He had to carry a Pimlico identity card at all times and follow all administrative instructions for the company’s control room.
- He was required to work a minimum of 40 hours per week.
- Although he leased the van through the company himself, Smith was required by the company to use the Pimlico branded van whilst working.
- His contract, despite stating Smith was a ‘self-employed operative’, explicitly referred to ‘wages’, ‘dismissal’, and ‘gross misconduct’. It also included a list of restrictive rules that applied to Smith’s working arrangements following termination.
- Whilst he was able to swap assignments with other plumbers already working for Pimlico, this was seen as simply swapping a shift rather than being able to provide a substitute – an important aspect in HMRC’s definition of a self-employed worker.
The five judges at the Supreme Court rejected Pimlico’s appeal, agreeing that the employment tribunal was ‘entitled to conclude’ that the company could not be considered as having been a ‘client or customer’ of Mr Smith.
The court confirmed that Gary Smith’s work for the firm fell under the definition of ’employment’ under section 83(2)(a) of the Equality Act.
Justice of the Supreme Court, Lord Wilson, said Smith should be considered a ‘limb worker’ of Pimlico, therefore should have been entitled to employment protection rights, including unfair dismissal.
What does the ruling mean for similarly ‘self-employed’ workers?
Although the decision of the Supreme Court does not change the established principles for determining employment status, it has drawn attention to the often neglected workers in the gig economy.
Each case is, of course, decided on an individual basis on the facts available. However, the court’s ruling could potentially have a huge impact on those in the flexible working economy, entitling them to:
- claim sick pay
- claim annual paid leave
- bring unfair dismissal cases to court
There are already a number of similar cases going through the courts at this very moment. So, it is possible that the government may soon be forced to clarify the laws relating to IR35 and self-employed flexible workers.
Talk to your Sunny accountant
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