In Plastic Omnium Automotive Limited v. Mr P Horton [2023] EAT 85, the Employment Appeal Tribunal (EAT) decided that the Employment Tribunal (ET) erred in not first considering who the parties to an agreement were before turning to the issue of whether the relevant company was a client or customer of the individual's business. This case is of particular importance because it clarifies the fundamental factors in determining the employment status of a worker. The case has to be considered against the ongoing trend towards tighter regulation of the gig economy with the proposed platform workers EU directive.

The facts

Plastic Omnium Automotive Limited (the Respondent) is a subsidiary of a French-owned multinational automotive components manufacturing group. The Respondent entered into a written agreement with a service company linked to Mr Horton (the Claimant), ProMan Design Limited (ProMan), specifically for the Claimant to provide services on projects. From 2011, ProMan was awarded various projects for project management services for the Respondent. The agreement between the Respondent and ProMan made no provision for a substitute for the Claimant to be provided. However, ProMan did supply the services of another individual, DB, to the Respondent for project management services from April 2011 to January 2012. The Claimant's previous partner owned a stake in ProMan and, after their relationship broke down, in 2018 he established a new company called ProManOne Ltd (ProManOne).

The number of days on which the Claimant provided services was determined by the Respondent. He reported to its programme director in the same way all other programme managers did and ProManOne (and previously ProMan) submitted invoices to the Respondent, which provided the Claimant with an access card for its premises, a laptop, a company email address and paid for his training days in the same way it did for its employees. The relevant contractual terms specified that the agreement was not between any individual supplied by ProManOne and that any liabilities of an employer arising from the assignment would be the liabilities of ProManOne. The contractual terms also provided that ProManOne would not receive payment from the Respondent for time not spent on its projects i.e. with regards to holidays, sickness absence or for any other reason. However, the ET found that the Claimant would have the same holiday period as other employees for which his daily fee included a sum. The ET found that the Claimant was "fully integrated" into the Respondent's business over the period he provided services for it (more than eight years), was treated in the same way as another newly employed programme manager of the business, liaised with the Respondent's clients and represented it on its behalf, having a similar level of autonomy to other managers. The Claimant worked regular hours Monday to Friday and, after his request to work from home was granted, he did so after 2017. The Claimant did not have appraisals on an annual basis, did not clock in or out, nor was he subjected to any disciplinary procedure.   

The Respondent terminated the contract for services with ProManOne in October 2019, leading to payment disputes for 21 days of work in November 2019, for which ProManOne invoiced the Respondent, who made payment for 19 days only.  As payment was made to ProManOne (and previously ProMan), the Claimant drew his salary and dividends from his limited companies. The Claimant sought to claim the alleged shortfall in payments as an unlawful deduction in the ET.  For this to succeed, he had to show he was an employee or at least a worker.

Of particular interest in this case is that, in late 2015 or early 2016, the Claimant was offered an employee position with the Respondent, but he rejected the offer. The judge found that this was because the arrangement, as it was, was beneficial to the Claimant. In addition, during a review of the agreement in January 2019, the Claimant did not mention that he no longer agreed with the terms of the agreement, nor did he say that it did not reflect the true relationship between him and the Respondent.

Worker v. employee

The definition of a worker is set out in section 230(3) of the Employment Rights Act 1996 (ERA 1996) and is defined as an individual who has entered into or works under:

• a contract of employment; or
• any other contract with the putative employer, whether express or implied, and within the contract there is a requirement for the individual to perform the work personally and the other party to the contract not to be a client or customer of any profession or business undertaking carried on by the individual.

In this case, the ET found that the 2011 agreement between the parties was a true reflection of the way in which the agreement was carried out. The judge considered whether the Claimant was an employee or a worker and concluded that he was a worker within the meaning of the ERA 1996, because there was a written agreement between ProManOne and the Respondent which specifically outlined that the Claimant would be personally providing the services under it. The ET found that the matter to be determined was whether the Respondent was a client of the Claimant's companies and it found that he was "clearly subordinate and dependent".

In considering the Respondent's appeal, the EAT held that the ET erred in not considering the fact that the agreement was not between the Claimant and the Respondent, but between the Respondent and ProManOne (and previously ProMan). The question as to whether the Respondent was a client of the Claimant's companies should only be a factor, once the contractual issue (i.e. the parties to the contract) was determined. As the contract was between the Respondent and ProManOne, the EAT found that the Claimant was not a worker.

Proposed EU Platform Workers Directive

The EU is considering new rules in relation to the working conditions of platform workers (those performing their work via digital platforms, such as delivery agents) as part of the gig economy. Draft legislation to improve working conditions for workers across the EU provides that an individual is presumed to be a worker, if certain criteria are met. These criteria include factors such as the level of renumeration, whether work is supervised, any rules in relation to appearance and certain restrictions of freedoms (including working hours). The proposed new legislation also considers new rules around artificial intelligence in the workplace. Organisations that engage workers regulated under EU legislation should keep an eye on these potential changes in determining the correct employment status for those in the gig economy.