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John Bowers QC on Employment Law: October blog

Law Commission paper
The recent Law Commission paper on Employment hearings structures (published on 26 Sept 2018) raises some interesting ideas. In particular, I welcome increaser in limitation periods to six months as three months is often too short to gather all relevant material and often tempers cool down after a longer period. It makes sense to make the extension periods the same, so that for unfair dismissal instead of the reasonable practicability extension might be substituted a just and equitable test which works well elsewhere.

The £25000 limit on breach of contract claims might be removed altogether; it is odd that it has not been raised so far and it does place a restraint on the number of cases that can be brought in the employment tribunal.

The intriguing idea is included that multiple respondents should be able to claim contributions from each other although perhaps in the absence of the claimants. This should be pursued in my view.

It is suggested that the EAT should have jurisdiction to take appeals from CAC in recognition cases; the present regime of judicial review restricts too greatly the scope of review and is expensive. The knowledge of the area amongst some Administrative Court judges is naturally minimal and sop this does seem a step forward.

Employment judges sitting in civil courts on discrimination cases poses more difficult issues. Probably cross ticketing employment judges to sit in civil courts on discrimination cases is the best way ahead.

These are my initial thoughts on a wide ranging document. More to follow!

The US Supreme Court drama
As someone who has sat as apart time judge for some years I found the evidence given by Judge Kavanaugh to be deeply concerning. It is difficult to envisage how he can bring an unprejudiced pair of eyes to his judicial task after his performance including his quite gratuitous attack on the Clintons. It may have been lapped up by the occupancy of the White House but I for one found the performance repulsive whatever the rights and wrongs of the alleged sexual assault. Such a spectacle demonstrates surely the superiority of our British method of selection judges.

Pimlico Plumbers Ltd and another v Smith [2018] UKSC 29 is one of many cases going through the courts on worker status and will set the standard for the future. It merits detailed consideration. In all these cases the facts are important.

Between August 2005 and April 2011 Mr Smith a plumbing and heating engineer, carried out work for Pimlico Plumbers Ltd which conducts a substantial plumbing business in London. He issued proceedings against Pimlico and Mr Mullins its MD in an employment tribunal alleging

  1. that he had been an “employee” of Pimlico and as such he complained, among other things, that Pimlico had dismissed him unfairly contrary to section 94(1) Employment Rights Act 1992; and/or
  2. that he had been a “worker” for Pimlico within the meaning of section 230(3) of the Act and as such he complained that Pimlico had made an unlawful deduction from his wages contrary to section 13(1) of it; and
  3. that he had been a “worker” for Pimlico within the meaning of regulation 2(1) of the Working Time Regulations 1998 and as such he complained that Pimlico had failed to pay him for the period of his statutory annual leave contrary to regulation 16 of them; and
  4. that he had been in Pimlico’s “employment” within the meaning of section 83(2)(a) Equality Act 2010 and as such he complained that both Pimlico and Mr Mullins had discriminated against him by reference to disability.

The tribunal dismissed the claim of employment but upheld the other claims to be a worker. Lord Wilson speaking for a united Court expressed the view that “It is regrettable that in this branch of the law the same word can have different meanings in different contexts. But it gets worse. For, as I will explain, different words can have the same meaning”.

Section 230(3) Employment Rights Act 1992 defines workers to include not only, at (a), an employee under a contract of service but also, at (b), an individual who has entered into or works under

any other contract … whereby the individual undertakes to … perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual …

Section 83(2)(a) Equality Act is slightly different: while the obligation to do the work personally is common to both, the Equality Act does not expressly exclude from the concept a contract in which the other party has the status of a client or customer.

Mr. Smith signed two written agreements with Pimlico, one in 2005 and the second in 2009. In the EAT Judge Serota QC concluded that, on the one hand, Pimlico wanted to present their operatives to the public as part of its workforce but that, on the other, it sought to render them as self-employed and in business on their own account; and that the contractual documents had been “carefully choreographed” to serve these inconsistent objectives. He also identified a third objective, to enable Pimlico to exert a substantial measure of control over its operatives.

In the second agreement the key terms were:

c. “You shall provide the Services for such periods as may be agreed with the Company from time to time. The actual days on which you will provide the Services will be agreed between you and the Company from time to time. For the avoidance of doubt, the Company shall be under no obligation to offer you work and you shall be under no obligation to accept such work from the Company. However, you agree to notify the Company in good time of days on which you will be unavailable for work.”
l. “You shall at all times keep the Company informed of your other activities which could give rise to a direct or indirect conflict of interest with the interests of the Company, provided that … you shall not be permitted at any time to provide services to any Customer … other than under this Agreement.”
n. “You are an independent contractor of the Company, in business on your own account. Nothing in this Agreement shall render you an employee, agent or partner of the Company and the termination of this Agreement … shall not constitute a dismissal for any purpose.”
o. “This Agreement contains the entire agreement between the parties …”

The manual which was incorporated into the contract included these provisions:

b. “Normal Working Hours consist of a five day week, in which you should complete a minimum of 40 hours.”
c. “Adequate notice must be given to Control Room for any annual leave required, time off or period of unavailability.”
k. “Any individual undertaking private work for or as a result of contacts gained during your working week and contravening the signed contract will be dismissed immediately …”

Lord Wilson started from the position that if he was to qualify as a limb (b) worker, it was necessary for Mr Smith to have undertaken to “perform personally” his work or services for Pimlico. An obligation of personal performance is also a necessary constituent of a contract of service.

Mr Smith’s contracts with Pimlico, including the company manual, gave him no express right to appoint a substitute to do his work. There were three passing references in the manual to his engagement of other people, of which the most explicit was the reference, quoted at para 19(f) above, to his requiring “assistance”. The Court said that “the evidence was indeed that some of Pimlico’s operatives were accompanied by an apprentice or that they brought a mate to assist them. But assistance in performance is not the substitution of performance. Equally the tribunal found that, where a Pimlico operative lacked a specialist skill which a job required, he had a right to bring in an external contractor with the requisite specialism. But again, since in those circumstances the operative continued to do the basic work, he is not to be regarded as having substituted the specialist to perform it.”

The tribunal found that Mr Smith did have a limited facility to substitute. He had accepted that, if he had quoted for work but another more lucrative job had subsequently arisen, he would be allowed to arrange for the work to be done by another Pimlico operative.

Lord Wilson formulated the key question as this: was Mr Smith’s right to substitute another Pimlico operative inconsistent with an obligation of personal performance?

The Employment Judge had concluded that the right to substitute another Pimlico operative did not negative Mr Smith’s obligation of personal performance. She held that it was a means of work distribution between the operatives and akin to the swapping of shifts within a workforce. Pimlico relied heavily on the decision of the Court of Appeal in Halawi v WDFG UK Ltd (t/a World Duty Free) [2015] 3 All ER 543.

Lord Wilson noted that the terms of the contract made in 2009 are clearly directed to performance by Mr Smith personally. The right to substitute appears to have been regarded as so insignificant as not to be worthy of recognition in the terms deployed.

The Court examined the nature of the contractual duty to perform generally and the right to substitute in particular. The unanimous Court held that “The tribunal was clearly entitled to hold, albeit in different words, that the dominant feature of Mr Smith’s contracts with Pimlico was an obligation of personal performance. To the extent that his facility to appoint a substitute was the product of a contractual right, the limitation of it was significant: the substitute had to come from the ranks of Pimlico operatives, in other words from those bound to Pimlico by an identical suite of heavy obligations. It was the converse of a situation in which the other party is uninterested in the identity of the substitute, provided only that the work gets done. “ The plumber was not in a relationship of client or customer.

Pimlico’s contractual obligation was to offer work to Mr Smith but only if it was available. The tribunal found that there was an umbrella contract between Mr Smith and Pimlico.

Pimlico made four substantial points on this:

  1. Without prejudice to his overall obligation to make himself available to accept work, if offered, for up to 40 hours each week, Mr Smith was entitled to reject any particular offer of work, whether because of the location or timing of it or for any other reason.
  2. Subject to that overall obligation, he was free to take outside work albeit not if offered by Pimlico’s clients.
  3. Pimlico reserved no right to supervise, or otherwise interfere with, the manner in which Mr Smith did his work.
  4. There were financial risks, as well as advantages, consequent upon Mr Smith’s work for Pimlico.

The Court drew attention to the fact that there were features of the contract which strongly militated against recognition of Pimlico as a client or customer of Mr Smith. In particular its tight control over him was reflected in its requirements that he should wear the branded Pimlico uniform; drive its branded van, to which Pimlico applied a tracker; carry its identity card; and closely follow the administrative instructions of its control room. The severe terms as to when and how much it was obliged to pay him, on which it relied, betrayed a grip on his economy inconsistent with his being a truly independent contractor. The contract made references to “wages”, “gross misconduct” and “dismissal”.

The proper disposal was to declare that, on the evidence before it, the tribunal was, by a reasonable margin, entitled so to conclude.

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