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The case involving plumber Gary Smith has been seen as something of a test case for the grey area of whether contractors are employees or self-employed, particularly in forms like taxi company Uber and other similar business models.
Pimlico Plumbers has lost at every legal stage and appealed it to the highest court in the land, the Supreme Court. (See: Plumbers set for test case employment status ruling - Shout99, Feb 2018).
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The Supreme Court ruling means that he is entitled to worker or employee rights such as holiday pay and protection from direct disability discrimination.
This has led to renewed calls to the Government to write into statute a positive definition of self-employment to avoid the type of uncertainty over who is and who isn’t a contractor which led to this case.
Unintended consequences
Julia Kermode from service providers trade association, The Freelancer & Contractor Services Association (FCSA), warned of the risk of unintended consequences. She said: "This is a landmark result that is important for workers everywhere and should send a resounding signal to those firms that engage self-employed people to check their contractual arrangements and working practices.
"Employment status is complex, and this case illustrates the need to retain three tiers of employment status as Gary Smith was neither employed nor self-employed. He was required to work at least 40 hours per week, was required to wear a Pimlico Plumbers uniform and drive a branded van. He also had to ask permission to take time off and Pimlico Plumbers restricted his ability to compete for other work. He was clearly a worker, and not self-employed, despite the intention of Pimlico Plumbers.
“The Government is once again consulting on employment status, however, I would fire a cautionary note that care must be taken to ensure that there are no unintended consequences from any decisions made which might penalise those people who are genuinely self-employed.
"Self-employed workers do not need an extra layer of red tape or any more legislation imposed on them that will serve to hamper them. They are driving the UK economy right now so let’s support them not punish them. Conversely a worker, like Gary Smith, should not be exploited and should be entitled to certain rights and benefits. This case is set to change the employment landscape forever.”
Call for statutory definition
Self-employment group, IPSE used this casre to call for a legal definition of self-employment.
Simon McVicker said: “IPSE understands the Supreme Court’s decision, and welcomes the certainty it provides for Mr Smith over his employment status.
“IPSE supports genuine self-employment because of the clear benefits it brings to our economy.
“We do not think businesses should be able to use the uncertainty about the legal definition of self-employment to declare that their workforce should all be contractors.
“The best way to address this legal uncertainty is to write into a law a positive definition of what constitutes self-employment. This would send a clear signal about who is and who isn’t self-employed, and would mean that people wouldn’t have to go all the way to the Supreme Court to get a resolution.
“IPSE has developed its own matrix to help determine employment status and to explain what genuine self-employment looks like. When we ran Mr Smith’s circumstances through it, it confirmed that he should not have been self-employed.
“Disappointingly, the Government doesn’t appear to support the idea of writing a positive definition into law, but this case demonstrates just how useful a positive definition would be.
“We should also be careful not to conflate the circumstances of this case with all instances of self-employment. In fact, the reality is that the vast majority of self-employed engagements are what they claim to be: genuine business-to-business engagements which are mutually beneficial to both parties."
Blurred
Seb Maley of tax advisers Qdos Contractor, said: "This verdict shows that the lines between employment and self-employment remain blurred and can easily be misinterpreted. And in many respects, the case ultimately reflects the need for simplification of complex employment law.
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“There is a difference between gig economy workers - who might well need protection and employee benefits - and professional contractors who - in many cases - would prefer to work completely independently.”
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Dave Chaplin from contractor site, ContractorCalculator, thought that there could be a silver lining if this provided soe legal clarity for the controversial off-payroll rules.
He said: "This ruling is a victory for Good Work, and is a landmark decision taken by The Supreme Court and should hopefully set considerable precedence. The extra cost of paying these rights to workers will be passed onto the client, but that's something I support, because people should have Good Work and not be exploited. Pimlico Plumbers hired 'self-employed' people and put them in branded vehicles, branded clothing, and has expected them to adhere to policies and processes for their company. They should be entitled to their rights, regardless of how much they earned. Hopefully we will see a wave of other firms complying with their statutory obligations as a result of today’s decision.
“The ruling also provides excellent legal clarification on status law and could demonstrate that the new off-payroll tax in the public sector has resulted in many contractors being incorrectly classified as ‘employed for tax purposes’ when they might not be considered employees under law. Instead, many of them are likely to be workers, in which case the new off-payroll tax would not apply.
“For the new off-payroll tax to apply, it must be shown that a contractor is an employee, and this judgment could demonstrate that many of them would only be classed as workers. We can now expect to see thousands of claims for wrongful taxation proceed.
“To go from being a worker to being classed as an employee requires sufficient mutuality of obligation (MOO) to be present. Recent IR35 rulings have made it clear that HMRC’s stance on MOO does not align with the law. HMRC also purposely omitted the test for MOO from their CEST tool, meaning thousands of workers have been subject to invalid assessments and incorrectly taxed.
“Not only is it entirely inappropriate to consider rolling the reforms into the private sector, but we need a full inquiry into the conduct by HMRC and Government surrounding the CEST development and implementation of the public-sector reforms.”
For more information about the controversial IR35 tests and rules; and other aspects of IR35, see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2018
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