The case at the highest court in the land centred on whether self-employed contractors are entitled to workers rights and benefits, such as holiday and sick pay.

Today’s judgment is set to have huge ramifications for those employed in the ‘gig’ or ‘sharing economy’, protecting their rights as employees.

But for Charlie Mullins, CEO of Pimlico Plumbers, the ruling means UK companies using self-employed contractors “face a tsunami of claims” after the London-based firm lost its appeal at the Supreme Court.

What’s the case about?

Plumbing and heating engineer Gary Smith, who used to work for an electrician Perth company, worked for Pimlico Plumbers between 2005 and 2011, under a self-employed basis.

In 2011, he issued proceedings at an employment tribunal against Pimlico Plumbers, claiming that he was unfairly dismissed, unlawful deductions had been made from his wages, that he hadn’t been paid for a period of statutory annual leave and there were grounds for discrimination due to his disability.

But the employment tribunal stated that Smith hadn’t been an employee under a contract of employment and therefore he was entitled to complain of unfair dismissal.

The contractor took the case to an appeal tribunal and the Court of Appeal where his case was unsuccessful. As such, he took the case to the Supreme Court.

Definition of worker

The Supreme Court ruled that Smith qualified as a worker under the Employments Rights Act 1996, including under the Working Time Regulations 1998 and the Equality Act 2010. The ruling came after it applied a series of tests relating to whether Smith undertook his work in a personal capacity and whether Pimlico Plumbers was considered as a client or customer.

After the judgment, Mullins said the case by Smith was one of “exploitation” where a “highly-paid, highly-skilled man used a loophole in current employment law to set himself up for a double pay-day”.

The Pimlico Plumbers founder, said: “Despite being paid more than £500,000 over three years by Pimlico Plumbers, Smith sued for employment rights, even though he signed a contract as a self-employed contractor.

“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.

“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.”

Mullins added that 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,” he said.

New range of worker benefits

Steven Cameron, pensions director at Aegon, said it remains to be seen how widespread the ramifications of the Supreme Court ruling in the case will be for those employed in the gig economy.

He added: “But it does suggest that those on longer-term ‘self-employed’ contracts could acquire a new range of worker benefits. This comes at a time when the government is grappling with how to plug the growing gap in pension provision for the self-employed, who unlike employees don’t benefit from being automatically enrolled into a workplace pension.

“As the government considers what rights long-term ‘self-employed’ contractors should acquire, a workplace pension should be high up their list,” he added.