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June 29, 2018

U.K. Employment Law Update: The Latest on the Gig Economy, When Are Contractual Variations Accepted, and Can Accepted Breaches Be Revived

U.K. Supreme Court: The Latest on Employment Status in the “Gig” Economy

In the latest high profile “gig” economy decision, the U.K. Supreme Court has held in Pimlico Plumbers Ltd & another v Smith [2018] UKSC 29 that Mr Smith, a plumber working for Pimlico Plumbers (Pimlico), was a worker rather than a self-employed contractor. Please see here for our report on the Court of Appeal judgment.

In coming to this decision, the Supreme Court considered two main issues: (i) did Mr Smith undertake to personally perform services for Pimlico, and (ii) was Pimlico a client or customer of Mr Smith? On the first issue, the Court looked at the terms of the contract, finding that the reference to “your skills” was a clear obligation of personal performance. Although there was a right of substitution in the contract, it was severely limited by the fact that the substitute had to be a Pimlico operative subject to the same obligations towards Pimlico as Mr Smith. On the second issue, although Mr Smith was free under the contract to reject a particular offer of work and to accept work elsewhere if no work was offered by Pimlico, the Court found that Pimlico had “tight control” over certain aspects of the relationship which was incompatible with a finding of contractor status. For example, Mr Smith was obliged to wear a Pimlico branded uniform and drive a Pimlico branded van, as well as being subject to various covenants restricting his working activities on the termination of the relationship. 

As a worker, Mr Smith will be entitled to certain rights including the right to the National Minimum Wage and paid annual leave. This decision is also important in the wider context of U.K. employment law, supporting the current trend of those working in the so called “gig” economy being found to have worker status.

Does Continuing to Work Without Protest Constitute Acceptance of a Contractual Variation? 

The Court of Appeal in Abrahall and others v Nottingham City Council and another [2018] EWCA Civ 796 considered whether employees who continue to work without protest after a variation of their terms of employment can be considered to have accepted the variation.

Nottingham City Council implemented a two-year pay freeze, contending that the alternative was to make redundancies. No employee brought a grievance in relation to this and, while the affiliated trade union strongly objected, it did not bring industrial action. At the end of the pay freeze period, the Council proposed an extension of the pay freeze, at which point several hundred employees brought claims for unlawful deduction from wages, arguing that they were contractually entitled to an annual pay increase.

The Court of Appeal agreed that the employees were contractually entitled to a pay increase and that the pay freeze had amounted to a variation of their terms of employment. The Court then looked at whether the employees’ conduct, by continuing to work, meant that they had accepted this variation. The Court held that it did not. While in some circumstances continuing to work following a variation may be treated as acceptance, this will ultimately depend on the particular facts of each case. Furthermore, the inference must arise unequivocally and therefore acceptance should only be inferred where there is no other reasonable explanation. Protest or objection at the collective level may also be sufficient to mean acceptance cannot be inferred.

This decision highlights the fact that reliance on implied acceptance of a contractual variation is risky and advice should be sought at an early stage.

Constructive Dismissal: Can Historic Breaches of Contract Be Revived After They Have Been Accepted?

In Pets at Home Ltd v MacKenzie [2018] UKEAT 0146/17/RN, the Employment Appeal Tribunal (EAT) considered whether past breaches of contract that have been accepted by an employee can be revived in the context of a constructive dismissal claim.

Ms MacKenzie was employed by Pets at Home as an Assistant Manager. She applied for a promotion on two occasions, once when pregnant in February 2015 and again when on maternity leave in January 2016. Both applications were unsuccessful. In March 2016, upon learning that another Assistant Manager (whom she had previously managed) had been promoted to the role, she resigned and brought claims arguing that the failures to promote her were acts of pregnancy and maternity discrimination and that her colleague’s promotion was the “final straw”. 

The EAT found that the Employment Tribunal had failed to consider whether the acts of discrimination were part of a “continuing act” of discrimination, or whether they were stand-alone breaches. It had also failed to consider how Ms MacKenzie had treated these acts at the time. If she could be considered to have accepted them, it would not be possible for her to rely on them several months later to form the basis of a constructive dismissal claim (which typically requires an employee to resign “promptly” following a fundamental breach of contract, such as an act of discrimination). The case was sent back to the Employment Tribunal to consider these issues.

While this decision will provide some reassurance for employers, it is important to note that the outcome of this case would have been different had Ms MacKenzie been able to show that there had been an “act of discrimination” leading up to the final straw.

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