Plumber wins workers' rights case

The June 13 ruling has added fuel to the debate over the categorisation of workers – many of whom are legally entitled to a workplace pension under auto-enrolment – and the provision of retirement income for the self-employed.

The Pimlico Plumbers case is going to be highly relevant for whether an individual is inside or outside the net of auto-enrolment

Alastair Meeks, Pinsent Masons

There are about 5m self-employed workers in the UK according to the Office for National Statistics. Pensions Policy Institute research in March revealed that only 28 per cent of self-employed people see pensions as the safest way to save, compared with 52 per cent of employees.

During the time he worked for the plumbing company, Smith had registered himself as self-employed for the purposes of income tax and VAT.

Not a surprising verdict

In August 2011 he issued proceedings against Pimlico Plumbers and its CEO and founder Charlie Mullins in an employment tribunal, alleging that he had been an ‘employee’ and a ‘worker’ at the company as defined by employment law.

Allegations included unfair dismissal, unlawful deduction from his wages and a failure to pay him for the period of his statutory annual leave.

In a judgment on April 16 2012, Employment Judge Corrigan ruled that Smith had not been an employee of Pimlico Plumbers.

The tribunal decided that he had, however, been a 'worker' for the company and under Pimlico's 'employment'. Pimlico’s subsequent appeal was first dismissed in 2014.

Following the June 13 ruling, Mullins said in a statement that he was "disgusted by the approach taken to this case by the highest court in the United Kingdom". 

He added: “The five judges had the opportunity to drag our outdated employment law into the 21st Century, but instead they bottled the decision, and as a result thousands of companies across the UK, who use contractors in an honest and responsible way, remain exposed to huge potential claims in the future.”

A spokesperson for the Pensions Regulator said the watchdog will study the judgment and consider its implications.

"Employers have a duty to automatically enrol qualifying workers into a workplace pension scheme and we carry out checks to ensure employers are giving their staff the pensions they are entitled to," said the spokesperson.

“We will continue to liaise with Pimlico Plumbers for information about its workforce and pension arrangements so that we can assess whether it is compliant with its automatic enrolment duties," the spokesperson added.

Alastair Meeks, a partner at law firm Pinsent Masons, described the recent ruling over the company’s further appeal as “utterly unsurprising”.

“This idea of something between an independent contractor and an employee is not a new idea,” Meeks said.

In fact, the idea stretches as far back as the 19th century. In its decision, the court cited an act of Parliament passed in 1875 that defined an intermediate category of worker.

The case will have consequences for employers considering the range of auto-enrolment, Meeks said.

He observed that auto-enrolment requirements relate to “job-holders”. A job-holder is described as a “worker who meets certain requirements”, he said.

A 'worker' is an individual who has either entered “a contract of employment”, he added, or “any other contract by which the individual undertakes due work or performs services personally for another person to the contract”.

Meeks said: “The Pimlico Plumbers case is going to be highly relevant for... whether an individual is inside or outside the net of auto-enrolment.”

Look at long-term servants of companies

The decision will increase already-growing scrutiny over the likes of Uber and Deliveroo concerning their legal obligations towards pension provision.

In 2017, Uber lost an appeal against a ruling requiring it to treat its drivers as workers. At the time, experts called for auto-enrolment reforms that would keep pace with a labour market shifting towards self-employment.

Steven Cameron, pensions director at provider Aegon, said there is no single solution for the self-employed, owing to the various categories of self-employed workers.

Cameron separated the self-employed into “the traditional one-man band companies”, the “highly paid professionals” and a third group with “longish-term contracts with one firm”.

The Pimlico case centres around this third category, according to Cameron, who advocated bespoke solutions for each group.

For this third demographic, “an obvious way forward would be to ask that employer to facilitate access to a workplace pension for those contractors”, he said.

Is further clarity needed from the government?

Andrew Chamberlain, deputy director of policy and external affairs at the Association of Independent Professionals and the Self Employed, called for the government to provide a “statutory definition and better guidance around status”.

“It’s clarity that we need, and at the moment it’s unfortunate that we have to put an engagement through a very protracted legal process in order to understand what the employment status is of it,” he said.

James Bingham, associate director at law firm Sackers, disagreed. “Definitions vary in different pieces of legislation, and I’m not convinced that adding another definition into the mix would clarify things,” he said.