Evans Weir News - Trump and Brexit

Contractors beware – Pimlico ruling has far reaching implications

The decision by the Supreme Court, to uphold the earlier findings of other courts, against Pimlico Plumbers, in the case brought by a former contractor, could have far reaching implications for the wider contractor market.

For those of you that have not followed this case, which has rumbled on for several years now, or if you missed the detail, the Supreme Court judges have effectively ruled that the nature of the contract between Pimlico and Mr Smith constituted that of employer/employee, giving Mr Smith the same rights as an employee.

Despite being self-employed, Mr Smith had a contract for 5 days a week with Pimlico, a company branded van and Pimlico had direction over his uniform and appearance. Whilst Mr Smith was able to work for other people, being self-employed, Pimlico also had some say over his ability to compete with them, during and after his contract. It was this combination of restrictive covenant within the contract that the Court ultimately decided was sufficient to constitute an employer/ee relationship as many of the same covenants would have been present within a normal contract of employment.

The matter first came to light when Mr Smith requested to amend his working days following a health issue, asking to reduce the contract down to 3 days from 5. Pimlico refused the request which led Mr Smith to taking the matter to tribunal more than 5 years ago. The case has rumbled on since then with multiple hearings, rulings and appeals, but the decision by the Supreme Court seems to be the end of the road, but only for this case. The decision could now lead to a rash of similar cases being brought amid numerous calls for clear regulation over contractors and the so called ‘gig’ economy.

From the perspective of the contracting companies, businesses need clarity over what constitutes self-employed and what is direct employment when engaging with contractors. Many businesses will claim that the rules governing employment and taxation of contractors differ and whilst one may class it as direct employment, the other may not.

Likewise, contractors need to know what their rights are, so they can determine the right form of contract with their customer and understand the implications and opportunities to alter the terms of engagement.

As with all contracts and agreements, it is not until the terms are legally tested that clarity prevails. In many cases, the business/contractor relationship works because both wish to ensure independence from the other but as this case shows an onerous and restrictive covenant, whilst designed to provide some security to either side, can backfire and equate to that of a contract of employment.