A Third Approach to Classification — What is a British “Worker”
The recent Pimlico Plumbers case provides insight into how the UK Supreme Court analyses worker classification. As we have previously discussed, under English employment law, individuals who provide services to a company can be classified in three different ways:
- Employees are party to a contract of employment and have the ‘full suite’ of employment rights, including to equal pay, sick pay, holiday pay, non-discrimination, and protection from unfair dismissal;
- Independent contractors are party to contracts for (not necessarily personal) services, but are not employees, and do not have any of the rights that flow from a contract of employment; and
- Workers are in an intermediate category, in that they are party to contracts for (personal) services rather than contracts of employment, and do not have all the benefits of an employee, but do have rights to equal pay and non-discrimination.
Whether an individual is a “worker” or an “independent contractor” turns on two issues: first, has the individual agreed to provide personal services to the company? (This is the “Personal Service Question”). Second, is the company the “client or customer” of the individual? (This is the “Client/Customer Question”). If the answer to the Personal Service Question is ‘yes’ and the answer to the Client/Customer Question is ‘no’, the individual is likely a worker rather than an independent contractor. Both questions were at issue in Pimlico Plumbers.
Addressing the Personal Service Question, the UK Supreme Court noted that the individual’s agreements with the company gave him no right to delegate work to other people, though they did contain provisions on assistance. The Court decided that, because the individual could not assign work without company consent, his personal performance was personal. The answer to the Personal Service Question was therefore “yes”.
The Court then considered the Client/Customer Question. The Court found the following facts favoured finding the company was the individual’s “client or customer”:
- The individual agreed to make himself available for work for a particular time, but could decline work assignments;
- The individual was not precluded from performing work for other entities;
- The company did not supervise the individual’s performance of his work; and
- The individual risked client non-payment (unless a client paid the company promptly, he did not receive payment).
Against that finding, the Court noted:
- The company exercised tight control over the individual, including requiring him to wear a company uniform, carry a company ID card and rent a company van;
- The company tracked the individual’s van;
- The company required the individual to follow instructions from its control room;
- The agreements contained reference to “wages”, “gross misconduct” and “dismissal”, all terms more germane to the context of an employee or a worker; and
- The strict payment provisions “betrayed a grip on [the individual’s] economy inconsistent with his being a truly independent contractor.”
The Court decided that the answer to the Client/Customer Question was “no”, placing considerable emphasis on the economic relationship between the company and the individual. The individual was therefore a “worker”.
In the UK, companies that think they have a small number of administrative employees and a large number of non-employees might be correct. The rub is that those non-employees might nevertheless have certain employment-style rights that increase both the costs and administrative burden in providing those rights, and the company’s exposure in litigation. Companies in the UK need to be careful about their contract terms and employee handbooks to ensure they have classified consistently and correctly their employees, independent contractors and workers.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.