Following the Court of Appeal’s decision that Mr Smith, a former plumber with Pimlico Plumbers, was a worker and not an independent contractor, Naeema Choudry, partner at Eversheds Sutherland (International) LLP comments.
Following hard on the heels of the Uber and Citysprint gig economy cases, today’s judgment is a wake-up call for employers reliant on independent contractors as an integral part of their businesses. A common confusion is to assume that workers treated as self-employed for tax purposes have no employment rights, such as paid holiday, pensions and the minimum wage. While that is true for those self-employed who genuinely run their own independent businesses, it is incorrect for a growing number of self-employed workers. These workers are typically subject to a greater degree of control by the business, are not allowed to send a replacement to do their work and are integrated into the organisation.
For example, they are presented to the outside world as part of the organisation, such as wearing a uniform, and they are told when, where and how to do their work. The law says that this is not a contract between two independent business undertakings and, as such, the worker is entitled to the enhanced protection of some, but not all, employment rights.
Given the growing number of tribunal claims in this area, and the accompanying negative publicity, employers need to review the employment status of their freelance and contracting workforce. The risk being that misclassifying a worker as an independent contractor may result in large financial exposure to unpaid holiday, pension and other entitlements, particularly where significant numbers of workers are involved.