Employee or self-employed? This is often a gray area which creates uncertainty for employees and employers alike. The legal issues have recently been brought to light, in particular as the case involving Uber drivers moves through the courts. Having reached the Supreme Court, the Pimlico Plumbers case is likely to have far reaching implications.
The U.K.’s highest court is currently considering a case which could have far reaching implications for employees’ rights in what is being termed the “gig economy.” A gig economy is one in which temporary positions are common, allowing organizations to contract with independent contractors for short-term engagements. The advantage to businesses is that they, in theory, save resources in areas such as benefits, office space and training. They also have the ability to contract with experts for specific projects who may be too costly to maintain as permanent staff. From the perspective of the individual, this can mean improved work life balance over what is possible in most jobs.
The Supreme Court is considering a legal appeal brought by Pimlico Plumbers and its founder, Charlie Mullins, which centers on the question of whether a tradesman is an independent contractor. Mr. Smith, a plumber who worked for Pimlico Plumbers over a five-year period from 2005, has already won a number of lower court rulings that determined that he could claim benefits and rights (for example, holiday pay and unauthorized wage deductions), which would not be available to an independent contractor. This is despite Mr. Smith being described in his contract as a “self-employed operative.” Factors which led to the Court of Appeal’s decision included the fact that Mr. Smith was required to use the firm’s van for assignments and was contractually obliged to do a minimum number of hours per week. Pimlico Plumbers recently appealed the decision and the Supreme Court’s decision is eagerly awaited.
The court’s ruling will have ramifications for other high-profile gig economy cases that are coming through the U.K. lower courts, including one involving Uber drivers. Uber has sought to overturn a decision in which two drivers successfully argued that they were not self-employed, therefore entitled to the minimum wage. The ramifications of the Supreme Court’s decision will also go beyond the U.K. jurisdiction, particularly in Cayman where we look to U.K. case law for guidance.
Over the years there has been a considerable volume of case law on this subject and there is therefore no definitive set of rules which can answer the question of whether an individual is an employee or an independent contractor.
That said, the usual starting point of what differentiates an employee from an independent contractor is to look at whether the individual is required to provide personal service in return for a wage or remuneration. For example, the individual could not appoint a substitute to perform the work. Further, consideration needs to be given to whether the “employer” has a sufficient degree of “control” over what the individual does.
As such, a genuine employee would commonly be told their place of work and their working days and hours, and be subject to the employer’s day-to-day direction and rules and policies.
A self-employed individual would usually have a greater degree of freedom in their method of working, and would most likely work independently from the “employer” and be less likely to be required to submit to the same controls or supervision that would be exercised over an employee. They are also more likely to be able to determine their own working days and hours.
Other examples which are indicative of an independent contractor relationship include: whether the individual provides and maintains their own tools or equipment used, whether the individual has the opportunity to profit from their own performance, whether the individual is paid a fixed amount on a regular basis, and whether the individual is paid when absent due to holiday or sickness. In addition, if the individual is free to work for other businesses this is a clear implication of independent contractor status.
It is also not sufficient to simply apply an express definition of the relationship in any agreement between the parties. The courts have increasingly demonstrated that they will look beyond what any contract or agreement may expressly state and will look in detail at the actual day-to-day workings of the relationship.
In Cayman, employers are required to provide a number of benefits to their employees – for example, health insurance and pension contributions, holiday and sick pay, and a minimum wage. In cases where businesses consider an individual to be engaged as an independent contractor, thereby removing the right to such benefits, the outcome of the Supreme Court’s decision will hopefully provide more clarity as to whether the engagement genuinely is of independent contractor status, as opposed to being more akin to an employee/employer relationship. This is important as, where an apparent independent contractor is found to actually have employee status, this could result in businesses being required to make good any obligations to provide benefits. For now, the guidance above should continue to be followed in making such an assessment.