Pimlico Plumbers Ltd v Smith

The Supreme Court dismissed the employer's appeal and upheld the tribunal's findings that Mr Smith was a limb (b) "worker" within section 230(3) of the Employment Rights Act 1996 (and therefore also within regulation 2(1) of the Working Time Regulations 1998 and the concept of "employment" in section 83(2)(a) of the Equality Act 2010). The court applied established authorities on the meaning of personal performance and on the test for subordination and client/customer status, concluding that the tribunal was entitled to find that the dominant feature of the contractual relationship was personal performance despite a limited and constrained right to substitute.

Key legal principles applied:

• The obligation to "perform personally" is the statutory touchstone for limb (b) worker status and is defeated only by a genuine contractual right of substitution (Express & Echo; Ready Mixed Concrete).
• A limited facility to substitute does not necessarily negate personal performance where the contract's dominant features require personal performance and any substitute would be subject to substantially the same obligations (per Hashwani, Allonby, Bates van Winkelhof).
• Whether the engager is a "client or customer" is a fact-sensitive enquiry directed to subordination, control and whether the individual forms an economic unit with the engager; the tribunal was entitled to conclude Pimlico was not merely a client or customer (CJEU and domestic authority guidance applied, including FNV Kunsten and Windle).

Background and parties: Mr Smith, a plumbing and heating engineer, worked for Pimlico Plumbers Ltd between 2005 and 2011 under written agreements and an incorporated Company Manual. He brought tribunal claims asserting employee/worker status for unfair dismissal, unlawful deduction from wages, entitlement to paid annual leave and discrimination under the Equality Act 2010.

Procedural history: The tribunal (Employment Judge Corrigan) held that Mr Smith was not an "employee" under a contract of service but was a limb (b) "worker" under section 230(3) of the Employment Rights Act 1996, a worker under regulation 2(1) of the Working Time Regulations 1998 and in "employment" for the purposes of section 83(2)(a) of the Equality Act 2010. The Employment Appeal Tribunal dismissed Mr Smith's cross-appeal on employee status and dismissed Pimlico's appeal on worker status. The Court of Appeal dismissed Pimlico's further appeal. Pimlico appealed to the Supreme Court, which delivered the present judgment.

Nature of the claim: The substantive relief sought by Mr Smith was to pursue claims available to a limb (b) worker: unlawful deduction from wages, unpaid statutory annual leave and discrimination/ failure to make reasonable adjustments. The Supreme Court was asked to review the tribunal's three threshold findings of limb (b) worker/worker/employment.

Issues framed by the court:

• Whether Mr Smith had undertaken to "perform personally" (the personal performance limb) so as to be a limb (b) worker;
• whether any right of substitution (formal or informal) defeated personal performance;
• whether Pimlico was a "client or customer" of Mr Smith such that limb (b) status was excluded (the subordination/client-customer enquiry).

Court's reasoning: The court analysed the written agreements and the incorporated Company Manual and treated the three threshold issues as conceptually linked (accepting the equivalence of the limb (b) worker concept with the Equality Act concept for present purposes). On personal performance the court held that the contractual documentation and the manual overwhelmingly directed performance to be by Mr Smith personally (references to "your skills", warranties as to competence, uniform, ID card and requirements of conduct). The tribunal was entitled to find that any substitution right was limited (at most permitting another Pimlico operative) and therefore did not negate personal performance. The court applied and relied upon authorities on personal performance and substitution (including Ready Mixed Concrete, Express & Echo, and precedent on direction/subordination such as Allonby and Hashwani) and accepted that the relevant enquiry into client/customer status is fact-sensitive. Considering control, the integrated nature of the operatives within Pimlico's business, financial arrangements and restrictive covenants, the tribunal was by a reasonable margin entitled to conclude Pimlico was not merely a client or customer. The Supreme Court found no material error of law in the tribunal's reasoning and dismissed Pimlico's appeal, allowing the worker-status findings to stand so that Mr Smith's substantive claims could proceed to hearing.

Subsidiary findings and context: the court noted an "umbrella" contract existed (obligations between assignments), recognised the commercial and tax position of Mr Smith as self-employed for tax/VAT purposes but emphasised that tax status is not determinative. The court also observed that the question whether an engager is a "client or customer" is a difficult and fact-specific enquiry and that the tribunal's approach and conclusions were within reasonable bounds. The court declined to rehear factual determinations and emphasised that the tribunal had addressed the relevant factors.

Appeal dismissed. The Supreme Court held that the tribunal was entitled to find that Mr Smith was a limb (b) worker under section 230(3) of the Employment Rights Act 1996 (and therefore a "worker" under regulation 2(1) of the Working Time Regulations 1998 and in "employment" under section 83(2)(a) of the Equality Act 2010). The court concluded that the contractual documents and Company Manual supported an obligation of personal performance and that any substitution right was limited and did not negate worker status; the tribunal was entitled to find that Pimlico was not merely a client or customer of Mr Smith.

Employment Tribunal (judgment dated 16 April 2012) — found not an employee but a limb (b) worker and in "employment" for Equality Act purposes; Employment Appeal Tribunal (Judgment 21 November 2014) — dismissed cross-appeal on employee status and dismissed employer's appeal on worker status; Court of Appeal (10 February 2017) — appeal dismissed ([2017] ICR 657; on appeal from [2017] EWCA Civ 51); Supreme Court ([2018] UKSC 29) — appeal dismissed.