web analytics
BOOK A FREE CONSULTATION

In what will be touted in the future as a landmark judgement in determining the rights of self employed contractors, the Supreme Court concurred with the findings of a tribunal that accorded worker status to a plumber. The ruling has put the cat among the pigeons, with employers viewing the judgement as a bellwether of sorts that could possibly impact them in the future. While judgements are delivered on the basis of evidence in each case with reference to past rulings, the judgement has triggered alarm bells among aggregators employing contractors.

Pimlico Plumbers

The ramifications of the judgement for employers

The case was brought by Gary Smith, who joined Pimlico Plumbers in 2005, after he was told he could not claim unfair dismissal following a heart attack because he was not an employee on an employment contract. The employment tribunal overturned the verdict, after the judges found that Gary did not have the right to substitute; was required to provide the services personally and could not regard Pimlico as a client.

For employers this effectively means that a review of contracts is mandatory to prevent similar cases. Contracts and the intentions of contracts notwithstanding, it is important to understand that when a case goes to the courts, the courts view it on the basis of many other supporting evidence and testimonies. Therefore, contractors who feel that they have a proper contract in place will find this as bolt from the blue.

Contracts need to be renegotiated and reviewed, reflecting the conditions of work and not just as protective clauses that can be misinterpreted. In the instant case, the employer paid the contractor more than £500,000 over a period of three years. The contractor was also paying self-employment tax and VAT, which may have given the employer assurance of the contract being considered as one between a self-employed contractor and a business. However, to the shock of the employer, the contractor was not considered as an employee, but as a worker with full rights to basic worker rights, including sick pay.

Four points raised in the appeal by Gary Smith that need careful consideration by employers

Four different points were raised by Gary Smith during the course of his first appeal, which led to the orders of the tribunal and the subsequent confirmation by the Hon’ble Supreme Court. It is interesting to note the points that led to the judgement.

Points raised by Gary Smith Court Ruling on points raised
He was an Employee as per Employment Rights Act, who was dismissed unfairly Court ruled that Gary Smith was not an Employee
He was a Worker as per the provisions of the Act, whose wages were deducted unlawfully Court ruled that Gary Smith was a worker
As a worker, he had not compensated for statutory annual leave Court ruled that he was entitled to statutory basic rights as a worker
Being in employment with the employer, he was discriminated on the basis of his disability Court ruled that Gary Smith was discriminated by the employer in contravention of the Equality Act.

The road ahead for employers

Employers need to relook their contracts and understand the difference between an employee, a worker and a self-employed contractor. Though it is true that this case may not necessarily be the yardstick that is applied for all cases where contractors have disputed their status, it is an eye opener for employers. Employers can certainly shield themselves from possible similar appeals by relying on the services of expert accountants to understanding the various clauses in contracts, actual working conditions, applicable laws and the various bye laws that are used in the interpretation of status of employee/worker/contractor.

As expert accountants with impressive experience and track record in the field of Self Employment Contracts, IR35 Status, and all HMRC/Companies House Regulations, we are best equipped to assist clients by reviewing contracts. Our review process makes full use of case studies and precedent setting judgements and orders of Tribunals and The Supreme Court.

Also Read : Important Case Study for Contractors in IR35 – Jensal Software vs HMRC

What was the Gary Smith Vs Pimlico Plumbers Case: Timeline of events

2005 Gary Smith joins Pimlico Plumbers as a Self Employed Contractor
Gary pays VAT and Self Employed Tax
Gary earns a six figure remuneration from Pimlico Plumbers for services
Pimlico Plumbers gives him a van with company logo and uniform
Contract permitted him to get another plumber take his place for particular tasks
Pimlico Plumbers lays down the rules on appearance and turnout
Contract has non-competitive clauses incorporated post termination
Gary Smith works exclusively for Pimlico Plumbers
Contract mandates the need for seeking permission to avail offs
2009 Fresh contract entered into by both parties
2010 Gary Smith suffers a heart attack
Gary Smith seeks reduction in work assignment days from five to three a we
Pimlico Plumbers declines request and takes allotted van back
Gary Smith is dismissed
2011 Gary Smith moves employment tribunal against Pimlico Plumbers
2012 Tribunal rules in his favour, concluding that though he is not an employee, he is a worker
2014 Pimlico Plumbers appeals in the Court of Appeal. Case dismissed by Court
2017 Pimlico Plumbers prefers appeal in the Supreme Court Appeal dismissed by Supreme Court
2018 Five Judge Bench of Supreme Court dismisses further appeal

For more case details : https://www.supremecourt.uk/cases/docs/uksc-2017-0053-judgment.pdf

Share this post


Sign up to our newsletter

Tax news for contractors freelancers and small businesses.