The Court of Appeal has handed down a judgment on whether or not a sub-contractor was in fact a worker, or properly self-employed.
It is very important to note that this question is dealt with from an employment rights point of view, not a tax point of view. The reason it matters is that a self-employed contractor does not have entitlement to minimum wage, or paid holidays or to claim discrimination. A “WORKER” does have those rights.
The case in question is Pimlico Plumbers v Gary Smith. Mr Smith was a plumber, doing work for Pimlico, and all agreed at the start he was self-employed. He paid his own tax, and received a higher rate of pay than those who were employed through PAYE. However, Mr Smith’s working arrangements were controlled tightly with numerous policies and procedures.
The Court of Appeal has decided that Mr Smith was a worker, and could claim discrimination. He was dismissed following a heart attack. It follows that he can claim unpaid holidays too.
The judgment rehearsed many aspects of the tests used by a court in deciding whether someone is self-employed, or a worker. Questions such as whether equipment was provided, or the main employer’s brand was used, or whether the employer controlled how work was to be performed.
The most interesting element of the judgment looks at the right of substitution, or put another way, the need for the work to be done personally. That is to say, if a person can send someone else to do the work on any given day, then it points to a self-employed relationship. The Court helpfully summarised the following “guiding principles”:
- An unfettered right to send someone else points toward a subcontractor;
- A conditional right, so the right to send another if the employer/head contractor approves, will not be indicative either way, it will depend on the facts;
- A right to substitute only when the worker is unable to attend, will show someone who is not self-employed;
- A right to send someone else subject to showing that the someone else is qualified, will not show a need for personal service and so support self-employed status.
It is important to note that this is only a guide, and each case will turn on its own facts, but it helps to see what the courts are thinking.