Recent Developments in the Gig Economy

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12 Jul 2018

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The recent case of Gary Smith v Pimlico Plumbers has been a significant case in relation to those engaging workers in what is known as the Gig Economy. The case was focused on workers’ rights and whether Gary Smith, who was contracted on a self-employed basis, VAT registered and paid tax as a self-employed individual, was nonetheless classed as a worker and entitled to rights such as sick pay.

What does current legislation say?

Under the current legislation, section 230 (3) of the Employment Rights Act 1996 defines a worker as an individual who has entered into or works under a contract of employment or any other contract, whether express or implied, oral or in writing, whereby the individual undertakes to perform personally any work or services for another party to the contract. In determining whether a relationship meets the criteria, Tribunals take into consideration the Multiple test when determining status. The factors that they consider, amongst others include:
  • Degree of control by the employer
  • Obligation of the employer to provide work
  • Whether the individual is obliged to provide service personally
  • Provision of tools and equipment
  • Mutuality of obligation
  • Integration within the business
The less of these factors which are present, the more likely a Tribunal would conclude the individual is not a worker and is genuinely self-employed.

Why was Gary Smith found to be a worker and not self-employed?

Mr Smith had been solely working for Pimlico Plumbers for approximately five and a half years. The arrangement was terminated by Pimlico Plumbers four months after suffering a heart attack. He subsequently claimed for unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, disability discrimination and unlawful deductions from wages. An agreement made between the parties in 2009 stated that Mr Smith:
  • Was under no obligation to accept work from Pimlico Plumbers
  • Was an independent contractor of Pimlico Plumbers
  • Had to provide his own materials
  • Had to drive a Pimlico Plumbers branded van with uniform and carry a Pimlico Plumber identity card
  • Was subject to restrictive covenants
The Supreme Court held that personal service was required from Mr Smith and he could not arrange for others to carry out his work for him.  This was because the agreement referred to ‘your skills’ and ‘you will be competent to perform the work.’ It was also held that although Pimlico Plumbers had a contractual obligation to offer work to Mr Smith only when it was available, Mr Smith was to keep himself available to work up to 40 hours on five days each week should Pimlico Plumbers offer him work. The Court found that Pimlico Plumbers exercised tight control over Mr Smith and pointed out that Mr Smith was obliged to wear uniform, carry an ID card and drive a Pimlico Plumbers branded van. After considering all of these factors, the Court held it pointed away from Mr Smith being an independent contractor and subsequently being a worker, therefore entitled to workers’ rights.

Is this a unique case?

No, this case follows the decision from October 2016 where Uber drivers in the UK won the right to be classed as workers rather than independent contractors, and therefore entitled to workers’ rights such as sick pay and national minimum wage. In the “Gig Economy,” instead of being paid a salary or an hourly rate, workers get paid for the ‘gigs’ they do such as a taxi journey or a food delivery.  This gives workers more flexibility to work when they want however it also means on occasions they could be paid below the national minimum wage amount for the work they undertake, especially when factoring in their expenses. This benefits “employers” as they do not incur extra costs when work is not available, they only pay when the work is available and being undertaken. Generally, workers in the Gig Economy enter into contracts on the basis of independent contractors and as such are not entitled to workers’ rights. The Uber case and now the Pimlico Plumbers case show the direction in which Employment Law has been applied in the area of the Gig Economy. According to figures from the BBC, from 2010 to 2016, London’s gig economy grew by 72% with the introduction of firms such as Uber and Deliveroo. Customers have access to these services from their mobile phone which has then in return increased demand for workers.

How will this impact the Gig Economy?

It has been reported that as the Pimlico Plumber case is a Supreme Court decision it will likely be seen as a precedent for future cases involving worker status. Recent decisions may affect the Gig economy as similar companies may start to change their business models or pass the increased costs onto customers as companies will incur a greater expense if those working for them are no longer deemed independent contractors but workers, entitling them to national minimum age and other workers’ rights.

Expert Support

For support with the employment status of your workers, Gig Economy issues, or tribunal support, speak to a Croner expert on 0808 145 3378

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