In a major blow for the "Gig" economy, the UK's highest court has ruled in favour of a heating engineer who challenged Pimlico Plumbers employment status.
The decision is likely to have a knock on effect for companies such as Uber and Addison Lee.
Pimlico Plumbers took its appeal to the highest court in the country after it lost a claim by self-employed plumber Gary Smith who, despite being paid more than £500,000 over three years by Pimlico Plumbers, sued for employment rights, even though he signed a contract as a self-employed contractor.
The five Supreme Court judges, who heard the appeal in February, found in favour of Mr Smith, which will impact employers across the country.
Delivering the judgment, Lord Wilson said: “Although the contract did provide him with elements of operational and financial independence, Mr Smith’s services to the company’s customers were marketed through the company.
“More importantly, its term enabled the company to exercise tight administrative control over him during his periods of work for it; to impose fierce conditions on when and how much it paid to him, which were described at one point as his wages; and to restrict his ability to compete with it for plumbing work following any termination of their relationship.
“We hold that the tribunal was entitled to conclude that the company cannot be regarded as a client or customer of Mr Smith. So Mr Smith wins the case and the [employment] tribunal can proceed to examine his claims as a worker.”
Charlie Mullins of Pimlico Plumbers 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 pay-day.
“The shame of all this is that it is generally accepted that current employment law is not fit for purpose, and needs to be changed. But when it's put to the test in our highest court there isn't even the slightest suggestion that there is a problem that needs to be addressed.
“This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.”
Charlie also criticised the approach to the case taken by the Supreme Court judges who failed to use the appeal as an opportunity to recognise that UK employment law is outdated and needs changing to bring it into line with modern working practices.
He said: “I'm supposed to say I'm disappointed with the outcome of the appeal. In reality I am disgusted by the approach taken to this case by the highest court in the United Kingdom.
“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.”