Gordons Legal Employment Update – 17 February 2017
Friday 17th February 2017
Besides a couple of very trade union specific cases, the employment law sphere has settled to a quiet slumber this week. In this edition, we address the landmark Pimlico Plumbers case, and cover the legal updates on the sector specific balloting thresholds.
Another week, another case on employment status …
The Court of Appeal has this week upheld a decision that a plumber who was “self-employed” for tax purposes was actually a “worker” and therefore able to bring a number of claims in the Employment Tribunal.
In Pimlico Plumbers and another v Smith, the Claimant was a plumber who carried out work solely for the Respondent. He entered into an agreement with the Respondent that stated that he was a self-employed independent contractor. The agreement made between the parties had stipulations as to working hours; required him to wear a uniform; to use a van marked with the Respondent’s logo (which was rented from the Respondent); and provided that he could only swap jobs with other plumbers who provided services to the Respondent. The Claimant also filed his own tax returns and was registered for VAT.
The Claimant had a heart attack and was subsequently dismissed from the Respondent. He brought proceedings in the Employment Tribunal. At a Preliminary Hearing, the Employment Tribunal determined that the Claimant was a “worker” and therefore could continue with his claims for holiday pay and unlawful deductions from wages, and that he was “in employment” under the extended definition set out in the Equality Act. The Respondent appealed to the Employment Appeal Tribunal, who upheld the Employment Tribunal’s decision.
The Respondent then appealed to the Court of Appeal, who also upheld the Employment Tribunal’s original finding. The Master of the Rolls, who gave the leading judgment observed that;
‘the case puts a spotlight on a business model under which operatives are intended to appear to clients of the business as working for the business, but at the same time the business itself seeks to maintain that, as between itself and its operatives, there is a legal relationship of client or customer and independent contractor rather than employer and employee or worker’.
Comment: Whilst it is important to note that these cases all very much turn on their own particular facts, this is the third recent high-profile decision which has found that so-called “self-employed” contractors are, in fact, workers. These decisions are likely to have huge implications for many businesses who operate under such a model, particularly in the so-called “gig-economy”. It is likely that there will be further decisions in the coming months along similar lines.
National Minimum Wage Offenders
359 employers have been ‘named and shamed’ by the government for failing to pay the National Minimum Wage to their employees. A total of 15,513 workers will receive back pay of £994,685 due to government investigations. HMRC also issued penalties worth around £800,000.
Among the top offenders, the retailing giant Debenhams failed to pay £134,894.83 to 11,858 workers. According to the retailer, an accounting error left the workers approximately £11.00 short. The company have been fined £63,000 by the HMRC.
Business Minister Margot James stated:
“… we have named and shamed more than 350 employers who failed to pay the legal minimum, sending the clear message to employer that minimum wage abuses will not go unpunished.”
You can see the government report and the full list here.
Comment: Although on its own ‘naming and shaming’ is not the toughest of sanctions for most companies, the reputational damage Debenhams will suffer is hardly ideal. There seems to be little point in not having accounting and payroll matters watertight to National Minimum Wage standards as demonstrated here; HMRC has investigatory powers which can lead to substantial fines not to mention bills for back pay!
Important Public Services (***) Regulations 2017
A number of Statutory Instruments are due to come into force on 1 March 2017 inserted by the Trade Union Act 2016. The Instruments will introduce a new 40% threshold of support that needs to be satisfied in any industrial action ballots in specific sectors. This threshold can be avoided if the relevant union reasonably believes that the majority of those balloted are workers who are not normally engaged in the provision of important public services. The sector specific Regulations relate to the important public services of; health, fire, education, transport and border security.
If you require any further information on the above developments please do not hesitate to get in contact with a member of the Employment Team, on the following number 0113 227 0100.