Worked or Self-employed

Are contractors really self-employed?

Business often take a decision to engage contractors, who are self-employed but do they really understand what it means to be a contractor and how it may affect their organisation?

How would they deal with a situation where regardless of the contract in place stating clearly that the individual they have engaged is a self-employed contractor, other factors indicate that they are not?

In a recent case of Pimlico Plumbers & Charlie Mullins v Gary Smith (PP) it was held that the plumbers employed by PP were workers and not self-employed contractors.

A worker can be defined as ‘as an individual who has entered into or works under (or, where the employment has ceased, worked under):

• ‘A contract of employment; or
• Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.’

What was this case all about?

Mr Smith was a plumber for (PP) and carried out work for the business for just over five years, from 2005 – 2011. Following a heart attack in 2011, he was dismissed from the business. Following this, Mr Smith submitted a claim to the Employment Tribunal (ET)that he has been unfairly or wrongfully dismissed from the business.

Mr Smith had signed an agreement with PP in 2005 which stated that he would have to wear a uniform which must be worn at all times, his minimum working hours were 40 hours a week, the business required adequate notice for any annual leave, he had to carry an ID card whilst carrying out work for PP. There were also restrictive covenants imposed by PP on Mr Smith that restricted him from working as a plumber in any part of Greater London for three months after termination of their agreement.

The Employment Tribunal found that Mr Smith was a worker under s230 Employment Rights Act 1996 and regulation 2(1) of the Working Time Regulations 1998.

PP & Charlie Mullins appealed this decision to the Employment Appeal Tribunal which upheld the ET’s decision.

What does this mean for Employers?

Due to the outcome of this case, it may be more difficult for companies to persuade the Courts that contractors they engage are self-employed as the ET is likely to look beyond the contractual agreement to identify their status.

Employers should take extreme care when drafting contracts and agreements and should ensure they understand what other factors they need to take into account to be certain that the contractors are not regarded as workers or employees.

If you are uncertain as to whether your contractor is actually a self-employed contractor or require assistance on drafting or reviewing your current agreements with your self-employed contractors please contact one of our expert employment lawyers on 020 7903 6888 now.