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Supreme Court decision on ‘worker’ status in Pimlico Plumbers

Craig Rajgopaul considers today’s Supreme Court decision.

The Supreme Court this morning handed down its decision in Pimlico Plumbers v Smith [2018] UKSC 29 upholding the decisions of the Employment Tribunal, the EAT and the Court of Appeal that Mr Smith was a ‘limb b worker’ (i.e. a worker within the meaning of 230(3)(b) of the Employment Rights Act 1996, regulation 2(1) of the Working Time Regulations 1998 and section 83(3)(a) of the Equality Act 2010). 

The judgment considers two key questions on worker status: (i) when will a right of substitution mean that an individual has not agreed personally to perform services; and (ii) what approach should be taken to deciding whether or not one party is a client or customer of the other party.

A limb b worker means an individual who enters into or works under “any other contract [other than a contract of service]… 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.”

Lord Wilson (with whom all the other JSCs agreed) noted that a limited or occasional power of delegation may not be inconsistent with personal service and posed the question “Where, then, lie the boundaries of a right to substitute consistent with personal performance?”.

He held that, in answering that question, the further question of what the dominant feature of the contract is may assist: “The sole test is, of course, the obligation of personal performance; any other so-called sole test would be an inappropriate usurpation of the sole test.  But there are cases, of which the present case is one, in which it is helpful to assess the significance of Mr Smith’s right to substitute another Pimlico employee by reference to whether the dominant feature of the contract remained personal performance on his part.

Mr Smith’s written contract did not refer to the right of substitution at all, and Lord Wilson held that the terms of his contract were clearly directed to performance by Mr Smith personally (referring, e.g., to ‘your skills’ and to a warranty that ‘you will be competent to perform the work which you agree to carry out’).  Whilst Mr Smith had the right to appoint a substitute for any reason (not only when he was unable to work), the substitute had to be another Pimlico operative “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 work gets done.

The interesting question is the extent to which, if at all, this is a development of the law.  In the Court of Appeal’s decision in Pimlico ([2017] IRLR 323), the Master of the Rolls (Sir Terence Etherton) considered the previous authorities and summarised the law as follows:

I would summarise as follows the applicable principles as to the requirement for personal performance. Firstly, an unfettered right to substitute another person to do the work or perform the services is inconsistent with an undertaking to do so personally. Secondly, a conditional right to substitute another person may or may not be inconsistent with personal performance depending upon the conditionality. It will depend on the precise contractual arrangements and, in particular, the nature and degree of any fetter on a right of substitution or, using different language, the extent to which the right of substitution is limited or occasional. Thirdly, by way of example, a right of substitution only when the contractor is unable to carry out the work will, subject to any exceptional facts, be consistent with personal performance. Fourthly, again by way of example, a right of substitution 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, will, subject to any exceptional facts, be inconsistent with personal performance. Fifthly, again by way of example, a right to substitute only with the consent of another person who has an absolute and unqualified discretion to withhold consent will be consistent with personal performance.

My initial view is that the Supreme Court’s judgment does not change this analysis much.  The facts of Pimlico fall somewhere between Sir Terence Etherton’s fourth and fifth examples above.  Whilst the Court of Appeal did not explicitly refer to the ‘dominant feature’ test, the Court of Appeal’s judgment that the right of substitution in this case did not negative personal performance was grounded in the fact that the express wording of the relevant contract required personal performance by Mr Smith.  In other words, the Supreme Court’s judgment is effectively a restatement of the law as it already stood. 

Client or customer
In respect of the question of whether Pimlico was a client or customer of Mr Smith the Supreme Court:

  • Decided that the Tribunal legitimately found that there was an umbrella contract between Mr Smith and Pimlico, such that it was not necessary to consider the relevance to ‘limb b worker’ status of a finding that contractual obligations subsist only during assignments.  The leading authority therefore remains the Court of Appeal’s decision in Windle v Secretary of State for Justice [2016] ICR 721 (holding that a lack of contractual obligations between assignments might indicate a lack of subordination consistent with the other party being a client or customer), unless and until the Supreme Court determines otherwise.
  • Confirmed that there is no single key to unlock the question of whether or not one party is a client or customer of the other, but that the following two pieces of guidance are of assistance in conducting the inquiry:
    • a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work as an integral part of that principal’s operations, will in most cases demonstrate on which side of the line a given person falls” (Cotswold Developments Construction Limited v Williams [2006] IRLR 181, per Langstaff J);
    • …whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services.” (Hashwani v Jivraj [2011] 1 WLR 1872, per Lord Clarke)

On the facts here, whilst noting features such as Mr Smith’s ability to reject work, the Supreme Court found that Pimlico had “tight control” over Mr Smith, reflected in, e.g., its requirement that he: wear a branded uniform; drive a branded van to which Pimlico applied a tracker, and closely follow the administrative instructions of Pimlico’s control room.  The “severe terms” as to when and how much Mr Smith would be paid also betrayed a “grip on his economy inconsistent with his being a truly independent contractor”.  Combined with references to ‘wages’, ‘gross misconduct’ and ‘dismissal’ in the contract, and a suite of restrictive covenants, the Supreme Court was satisfied that the Tribunal was entitled to find “by a reasonable margin” that Pimlico was not a client or customer of Mr Smith.

CLICK HERE to read the full decision.

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