An employment tribunal has recently considered the employment status of those providing estate agency services on behalf of Purplebricks Group Plc. Of particular interest to organisations operating franchise and licensing models are the factual circumstances identified in support of this decision.

Whether an individual can establish employment status has enormous consequences for the level of rights and protection they can access. But the question of whether an individual is an employee, worker, or indeed neither cannot be easily determined by a single universal question – it is for the tribunal to weigh up a range of relevant factors. This case was no exception. Here, that analysis resulted in the conclusion that the lead Claimant, Mr Williams, was neither an employee nor a worker of Purplebricks. We explore below what factors led to the tribunal’s conclusion.

Employment status - what is the test?

The diverse nature of working relationships means that there is no single test to answer the tricky question of classification. It is well-established that the test draws on a range of factors. It is also not a simple checklist exercise, but a broader consideration of the circumstances in the round.

We have written in detail about the legal test here, but, in summary, the evolution of case law has established that the three key aspects of employee status are:

  • Personal service.
  • Mutuality of obligation.
  • Control.

These factors are described as the ‘irreducible minimum’, without which it is highly unlikely that an individual will be an employee. However, all aspects of the relationship are taken into account and assessed for consistency with an employment relationship. This was particularly apparent in the tribunal’s analysis in this case.

Operating as a Purplebricks license holder

The Claimant in this case was dismissed, on capability grounds, on 26 May 2022. His ability to pursue a claim for unfair dismissal therefore depended on him having been an employee for at least two years by that point.

Although the Claimant had worked with Purplebricks since November 2015, it was only accepted by the Respondent that he became an employee from September 2021. At this point, all estate agents became employed by Purplebricks owing to a deliberate strategic change to the business model to achieve greater oversight and control over their services, and to improve brand consistency.

Prior to this, the Claimant operated under what was essentially a franchise agreement with Purplebricks: as the owner of a ‘Territory Operating Company’, the Claimant operated as licensee under a commercial arrangement called a Territory Owner Agreement.

The arrangements changed slightly during this period and the tribunal had to consider whether the Claimant was an employee (or worker) of Purplebricks under two slightly different arrangements:

1. First, when the Claimant provided services to Purplebricks as a Territory Owner via his personal service company, DNPB Ltd.

2. When the Claimant provided services to THF as a Local Property Expert, again via DNPB Limited.

The tribunal’s decision

Relevant factual considerations

In determining the Claimant’s employment status, the tribunal was required to look at all the circumstances in order to establish the reality of his legal relationship with Purplebricks. The tribunal identified a lengthy list of factors that supported the conclusion that the Claimant was neither an employee nor a worker of Purplebricks prior to the change in operating model in September 2021.

Taken together, these factors indicated that the Claimant had very significant freedom as to how he ran his business, he took on risks and costs himself, and benefited from the structure of the arrangements from a tax and liability perspective. In particular, key among these factors were the following:

  • The Claimant set up a personal service company as a vehicle for him to conduct business with the Respondent. He was an employee of that company and he engaged other ‘Local Property Experts’ through their own company.
  • He acquired a software license from the Purplebricks under their commercial agreement.
  • The commercial agreements made it clear that the Claimant was entitled to operate in any way he wished - he was not under the control of the Respondent. For example, he could set his own working hours and did not need approval from Purplebricks in order to take holiday Importantly, there was no obligation on the Claimant to undertake work personally - he could appoint a substitute – and there was no restriction on the Claimant working for others.
  • Again reflecting his independence, although property leads were generated centrally, it was up to the Claimant whether he chose to act on them. Similarly, he could generate his own leads.
  • The Claimant’s business was registered for VAT and paid corporation tax on dividends and the profits realised by the business.
  • He was responsible for maintaining various insurances such as public liability, employer’s liability and professional indemnity and he was required to register with the Property Ombudsman. He was also responsible for hiring his own staff, ensuring they maintained adequate service levels, and covering the costs of staff training.
  • The commercial agreement with Purplebricks made provision for the Claimant to sell his business.

The tribunal was satisfied that the arrangements were entrepreneurial in nature and that any limitations or restrictions arising from the governing commercial agreements were limited in nature and not unusual in the context of ordinary commercial arrangements (to protect the Purplebricks’ brand, for example).

What does this mean for employers?

Whilst this is only a first instance decision, it serves as a useful reminder of the need for the tribunal to scrutinise all the relevant factors, both in terms of the contractual provisions and how they operate in reality. That said, certain considerations in status cases remain fundamental: the ‘irreducible minimum’ of personal service (and, crucially, the right to substitute), mutuality of obligation and control must be present. It was Purplebricks’ position that none were present in this case, to any material degree.

In this case, the tribunal was willing to analyse a commercial agreement to consider whether there was an employment or worker relationship. The factors considered significant in this assessment will be of interest to organisations operating these kind of business models.

For more information or for any advice on employment status, please contact a member of Lewis Silkin’s specialist employment status team. 

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