By PaperRocket Accounting, Jun 14 2018 09:07AM
Yesterday, the Supreme Court rejected an appeal from Pimlico Plumbers in relation to an earlier ruling regarding the employment status of Gary Smith.
It has been hailed by some as a landmark ruling with wide spread implications for the so-called ‘gig economy’ as well as independent contractors, but what effect will this ruling really have?
What are the key points of the case?
The whole issue began when Gary Smith, a plumber working on a self employment contract for Pimlico Plumbers, requested a reduction in his work schedule from 5 days a week to 3 after suffering a heart attack. His request was denied and he was subsequently dismissed.
Back in 2011, Mr Smith brought claims against Pimlico for disability discrimination and basic workers rights, claiming that he was engaged as a ‘worker’, rather than self employed. A tribunal ruled in Mr Smith’s favour. Despite having worked solely for Pimlico for 6 years, and being VAT registered and paying self employed tax, the court ruled that he was indeed entitled to workers’ rights.
However, Pimlico argued that Mr Smith was indeed an independent contractor and launched an appeal into the tribunal ruling. Yesterday, the Court of Appeal ruled that he was indeed a worker based on the fact that he was not allowed to provide a substitute, he had a lack of control over the way in which he performed his work and he was contractually obliged to do a minimum number of hours per week. As a worker, Mr Smith would be entitled to employment rights, such as holiday and sick pay.
What the ruling means for freelancers and contractors
Pimlico Plumbers CEO Charlie Mullins warned that other companies using self-employed contractors may face a “tsumani of claims” as a result of this ruling, and that this was an “exploitation” by a highly-paid, highly-skilled man who used a loophole in current employment law to set himself up for a double pay-day.” It is likely that this ruling will have an impact on both the Uber, and CitySprint cases which are due to be appealed later this year. At the very least, it may well encourage other ‘self employer’ contractors to challenge their own legal status.
More significantly for contractors, it is the latest in a line of tribunal cases which have reaffirmed the problems with HMRC’s interpretation of mutuality of obligations (MOO) and it’s CEST tool, which has been outed as ignoring MOO. As part of this ruling, the Supreme Court looked in depth at the mutuality of obligation and in making their ruling, stated that although Pimlico had no obligation to provide Smith with work on days where there was none available, “it would seem hard to understand why, in the normal course of events, Pimlico would not be content to be obliged to offer work to him”. Surely if the courts are placing such emphasis on MOO, this should be factored into HMRC’s own IR35 determination tool?
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