The court upheld an employment tribunal claim brought by Gary Smith, who had been dismissed by Pimlico Plumbers following a heart attack in January 2011. The tribunal had rejected an unfair dismissal claim brought by Smith, as he did not have the status of 'employee'.
Employment law expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com, said that the case further underlined the "uphill battle" for so-called 'gig economy' firms seeking to prove that those providing services on their behalf were not 'workers' where there is a sufficient degree of control.
"In reaching its decision, the Court of Appeal determined that Smith was required personally to carry out the services; that Smith was obliged to do a minimum number of hours of work and that in all the circumstances it could not be said that PP was a client or customer of Smith," he said.
"The decision in this case follows the decision of the employment appeal tribunal (EAT) in the Uber case last year, and decisions of employment tribunals relating to Deliveroo and City Sprint couriers. In all of these recent cases the individuals concerned have successfully argued that they are entitled to be treated as 'workers'," he said.
Although each of these cases turned on its own facts, as Lord Underhill was "at pains" to point out in the present case, Neilson said there was a "clear trend emerging that businesses that set themselves up to provide services or goods and make use of casual workers are likely to have an uphill battle to persuade tribunals that such individuals are not workers".
"This whole area is the subject of an independent review led by Matthew Taylor, the chief executive of the RSA. It will be interesting to see whether his review considers that any further protections are required," he said.
Smith signed an agreement to provide plumbing work on behalf of PP in August 2005 until the relationship ended in May 2011. The agreement required Smith to work a minimum number of hours over a five-day week, to wear a uniform with a PP logo and rent a PP-branded van, while preventing him from undertaking "private work" during his working week or "using information gained while working for the company for anything under the company's benefit". Smith was able to decide on his own working hours, and could reject particular jobs assigned by PP in certain circumstances.
The crucial point for the employment tribunal in this case was that Smith "undertook to provide his services personally" to PP, in line with the relevant legislation. It was also relevant that Smith was obliged to work a normal 40 hour week under the contract, regardless of whether or not it was enforced. The Court of Appeal agreed, finding that the evidence before the tribunal was "clear and consistent".
"Having considered all [the relevant] factors, the [tribunal] rightly stood back and asked and answered ... the over-arching question whether the better conclusion was that PP was a client or customer of Mr Smith's business or rather PP should be 'regarded as a principal and Mr Smith was an integral part of PP's operations and subordinate to [PP]'," said Sir Terence Etherton, giving the judgment of the court.
"In carrying out its evaluation and reaching its conclusion that it was the latter, the [tribunal] made no error of law or principle and did not reach a decision outside the ambit of what was judicially permissible," he said.
Employment tax expert Chris Thomas of Pinsent Masons said that it was irrelevant for the purposes of this case that Smith was registered for VAT and paid tax on a self-employed basis. The fact that he was found to be a worker, not an employee, was consistent with these tax arrangements, he said.
"As part of the various reviews into the whole 'gig economy' issue, the government is looking at the possibility of making changes to the way in which workers and other self-employed individuals are taxed, so as to potentially bring workers more in line with employees from a tax perspective," he said. "Employers should watch this space, as there may be announcements on that theme in next month's Budget."