The Supreme Court has ruled that a plumber classed as self-employed was in fact a worker, in a landmark case for the gig economy.
Despite paying self-employed tax and being VAT registered, Mr Smith was a worker, the Supreme Court said.
Worker status means entitlement to a national minimum wage, holiday pay and protection from discrimination.
The decision has the potential to impact the rights of many people classified as independent contractors across the UK, including those at gig economy firms such as Uber and Deliveroo.
The company argued that Mr Smith had freedoms, such as the option to substitute someone else to carry out his work, if he wished.
But the Supreme Court justices said: “The dominant feature of Mr Smith’s contract was that he must do the work himself.”
The company exercised “tight administrative control” over Mr Smith and he “undertook to do the work personally”, the Supreme Court said.
Pimlico Plumbers required Mr Smith to wear a company branded uniform and to lease one of its vans, which displayed the company’s logo and was equipped with a GPS tracker. Mr Smith also had to work a minimum number of hours per week.
Rebecca Hilsenrath, chief executive of the Equality and Human Rights Commission, hailed the judgment as “one of the biggest decisions ever made by the courts on workers’ rights”.
“If you wear the uniform, if you drive the branded vehicle, if you only work for one business, you are employed. That means you are entitled to the appropriate protections and adjustments which go with the job, to enable you to work safely and productively. Everyone has the right to a healthy working environment, and to that end businesses need to recognise their duties to their workers.”
She added: “Thousands of workers like Gary Smith could now find themselves with the added security of benefits like sick pay and holiday pay.”
The case centred on Gary Smith, from Kent, who worked for Pimlico Plumbers between August 2005 and April 2011.
He suffered a heart attack in January 2011 and later sought to work three days per week instead of five, as he had done previously.
Pimlico Plumbers refused to grant Mr Smith’s request and took away his branded van, which he had hired from the company. Mr Smith claims he was unfairly dismissed in May 2011.
His case will now return to an employment tribunal to settle his unfair dismissal claim as a worker.
Charlie Mullins, chief executive of Pimlico, said: “For those who think this is a victory for poorly paid workers everywhere, against large corporations who exploit their lack of bargaining power, think again.
“In fact, this was exploitation – but instead by a highly paid, highly skilled man who used a loophole in current employment law to set himself up for a double payday.
Susannah Kintish, an employment partner at Mishcon de Reya who has led the case for Pimlico since 2011, said it was disappointing the Supreme Court had not laid down any clarifications for employers about how to classify workers.
“Instead, all eyes will be on the government as businesses await legislation on how to categorise their workforce – something which could still be a matter of years away,” Ms Kintish said.
“In the meantime, the gig economy continues to evolve and existing employment law is rendered increasingly unfit for purpose.
“The Employment Rights Act dates back to 1996. The world of work has transformed since then. The law around classifying a worker goes back to 1875.
“The Supreme Court justices have made it clear that this judgment is very specific to the unique facts of the case. It will therefore do little to stem the flow of litigation around worker status which, in the absence of any overarching principles, will need to be determined on the specific circumstances of each case.”
Mr Smith’s situation is very different, Ms Kintish argued, to those faced by an Uber driver, for example.
Mr Smith earned six-figure sums in some years and took advantage of tax breaks such as writing off a room in his home, as an expense, and employing his wife as his secretary.
Sean Nesbitt, an employment partner at Taylor Wessing, said the decision made it clear that the Supreme Court wants to manage a “flood” of cases challenging people’s employment status.
He added that the ruling reinforces the weight of the decision in the original Court of Appeal judgment and could encourage the court in a decision due to be made in October over an appeal by Uber.
“I would expect this to impact every manner of organisation, whatever the industry, in how they construct and operate their contracts,” Mr Nesbitt said.
Jonathan Bartley, co-leader of the Green Party, said the decision was a victory for workers’ rights.
“The bogus use of self-employed contracts in the gig-economy has seen countless workers left without basic rights like decent pay, sick and holiday leave and, most importantly, job security,” he said.
“Pimlico Plumbers must now do the right thing and end its use of self-employment contracts altogether.”