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Paul Gilroy KC Successful in Employment Status Test Case

08.06.23

Background

The Employment Tribunal has recently handed down Judgment in Williams v Purplebricks Group Plc Case number 2601772/2022, an interesting employment status test case, in which Paul Gilroy KC acted for the successful Respondent, instructed by Lewis Silkin LLP.  The case will be of interest to those considering the employment status implications of franchise and licence agreements.

 

The Facts

Purplebricks offers an online platform for property buyers and sellers.

From 30 November 2015 onwards, Purplebricks entered a contract, referred to in the Judgment as a “Territory Owner Agreement/TOA,” with Mr Williams’ company, DNPB Limited, referred to in the Judgment as a “Territory Owner Company/TOC,” and Mr Williams as a separate legal entity, referred to in the Judgment as a ‘Territory Owner/TO.”

That Territory Owner Agreement provided for a sublicence agreement, referred to in the Judgment as a “Licenced Business Partner Agreement/LBPA” between DNPB Limited and service companies, which was subsequently signed by Purplebricks as a Software Licensor.

From 11 February 2020 onwards, Mr Williams provided services as a “Local Property Expert/LPE” through his Company, DNPB Limited, referred to in the Judgment as a “Local Property Company/LPC” to another Territory Owner Company, THF Estimates Limited, pursuant to a contract between DNPB Limited and THF Estimates Limited, referred to in the Judgment as a “Local Property Company Agreement/LCPA”. In turn THF Estimates Limited entered into a Territory Owner Agreement with Purplebricks.

 

The Issues

In Williams, the Tribunal was called upon to determine whether the Mr Williams was an employee or worker of Purplebricks for the purposes of s230 Employment Rights Act 1996 in the following circumstances:

(i) between 30 November 2015 and 10 February 2020 when Mr Williams provided services to Purplebricks through his Company, DNPB Limited, pursuant to a contract between himself and Purplebricks and DNPB Limited and Purplebricks, and

(ii) between 11 February 2020 until 31 August 2021 when Mr Williams provided services as a Local Property Expert through DNPB Limited to another Company, THF Estimates Limited, pursuant to a contract between DNPB Limited and THF Estimates Limited, which in turn had contracted with Purplebricks to provide services.

The Respondent’s case was that Mr Williams was only an employee from 1 September 2021 when prior arrangements ceased, and he was offered and accepted a contract of employment.

 

Judgment & Reasoning

At paragraph [99] of the Judgment, the Tribunal applied the “multiple test” to determine employment status as set out by McKenna J in Readymix Concrete Limited v Minister of Pensions and National Insurance [1968] 1 ALL ER 433:

“A contract of service exists if these three conditions are fulfilled; (i)The servant agrees that in consideration of all wage or other remuneration he will provide his own work and skill in the performance of sub service for his master. (ii) He agrees expressly or impliedly that in performance of that service he will be subject to this control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with it being a contract of service.”

It further noted at paragraph [100], it “must determine what the true situation was in the circumstances of the case” and that “determining whether Mr Williams was either an employee or a worker does not involve me drawing up a list of the factors for and against the proposition, totting them up and reaching a conclusion. The analysis is qualitative rather than quantitative.”

Applying the multiple test to the facts of the case the Tribunal determined that Mr Williams was a self-employed contractor until 1 September 2021 when he became an employee.

At paragraphs [101] to [126] the Tribunal placed weight on the following factors in concluding at paragraph [125] that “whilst there were contractual obligations that DNPB limited had with the Respondent they did not amount to control of his business and the way it operated other than in an ordinary commercial agreement” and at [126] that “Mr Williams was operating on his own account in his own business through his Company DNPB Limited.”

 

1. At all times, Mr Williams provided all his services via DNPB Limited a Company which he owned.
2. He was an employee of DNPB Limited.
3. He engaged other Local Property Experts to work for DNPB Limited through their own Companies.
4. Under the TOA DNPB Limited acquired from Purplebricks a Software Licence which comprised the right to make use of Purplebricks’ software.
5. The TOA referred to the TO’s business and it was the intention of the parties that this was a business operated by Mr Williams and that he would be entitled to operate in any way he wished in his area in relation to referrals he received from Purplebricks and also leads he created himself.
6. Mr Williams’ business was registered for VAT.
7. Mr Williams was responsible for providing his own (i) professional indemnity (ii) employers liability and (iii) public liability insurance.
8. Mr Williams was responsible for hiring his own staff and making sure that levels of service were adequate.
9. Mr Williams had to register his business with the Property Ombudsman.
10. Mr Williams was responsible for paying for the attendance of training of all staff who he engaged.
11. The TOA made express provision for him to sell his business.
12. The LPCA had almost the same provisions as the TOC except for the ability to sell the business.
13. The business paid corporation tax on its dividends on the profits Mr Williams had made from the business. His running costs including those who worked at the business were paid by DNPB Limited.
14. Whilst Purplebricks provided a laptop, camera and measuring device to Mr Williams they did not provide for motor vehicles which were paid by TOC’s and LPC’s.
15. The TOC’s and LPC’s had their own accountancy advisers.
16. There was no obligation on TO’s or LPE’s to personally undertake any work.
17. The LPE’s undertook the work and invoiced the TOC for the work they did, and the TOC, then invoiced Purplebricks, including for the work the TOC owner had done himself.
18. There was little or no control by Purplebricks on the way the TOC’s and LPC’s carried out the work.

 

The Tribunal placed little weight on the obligations placed on the Claimant under the respective agreements. At paragraph [58] of the Judgment the Tribunal found that:

“There was some control by the Respondents over the way he operated his business. That control is covered in the agreement under his obligations and about the service level agreement. There is nothing unusual though in a business such as this for the Respondent to expect certain standards of delivery of the services to what are customers of Purplebricks. At the end of the day those customers paid Purplebricks and would complain to Purplebricks if they were unhappy with the service they had been provided with. The customer service deadlines simply set out the requirements for ensuring that Purplebricks customers are satisfied with the services that are provided to them by the Claimant.”

Further the Tribunal placed little weight on the control of referral business. At [59] the ET found:

“TOC’s and LPE’s were required to refer conveyancing work to specified firms and mortgage business to specified firms. I am satisfied that that is simply part of a commercial arrangement that Purplebricks had with those referrers, and it does not alter my overall view of the way in which this business operated.”

The LPC’s could sub-contract their own Companies work and could alter customer appointments without approval by Purplebricks. Even if they had accepted an appointment with a customer, they could contact the customer and rearrange the date and time of the appointment if they wished to do so or arrange for another LPE to attend a meeting with a customer.

There was no restriction on the TOC’s and LPC’s working for others, and they were free to set their own working arrangements including hours and holidays. They did not have to seek approval from Purplebricks on any of these matters.

Purplebricks paid fees to the TOC’s who in turn paid fees to the LPC’s. There was no fixed or set amount and the amount of fees that could be earnt varied each month.

The TOC’s and LPCs were run as their own business, assumed their own risks and insured against those risks. They were in business on their own account.

Mr Williams accepted the structure of the arrangements with Purplebricks, and he had gained considerable advantage from those arrangements in terms of his tax position and his liability including being paid under the Coronavirus Job Retention Scheme and obtaining a Bounce Back loan from HMRC.

 

Conclusion

The decision in Purplebricks, albeit first instance, has important ramifications for businesses entering into franchise and licence agreements. It serves as a reminder that the Courts are increasingly willing to analyse commercial agreements to consider whether incidents of employee or worker status are present.

Whilst the issue of worker status in the context of franchise agreements has come before the Tribunal before in Strojasvjevic and anor v DVD Group UK Ltd EAT 0118/20, which considered whether the right of franchisees to substitute personal performance for a driver of their choice was inconsistent with limb b worker status, Purplebricks is interesting in the way the Employment Tribunal considers control. Whether Tribunals will analyse contractual obligations as to service delivery and control of referral business as giving rise to sufficient control so as to shift the agreement beyond an “ordinary commercial agreement,” and towards establishing control as a necessary ingredient of employee or worker status, remains to be seen, but the decision in Williams v Purplebricks is certainly helpful to companies running arrangements akin to franchise arrangements in defeating such claims.