A hundred estate agents who have previously worked at several high profile hybrid estate agencies have signed up to join a group litigation order – commonly known as a ‘class action’ – to sue their former ‘employer’ for lost holiday pay and pension contributions.
The legal action, which is to be launched by specialist law firm Contractors For Justice (C4J), is being brought under HMRC’s IR35 contractor regulations.
It is likely that the thousands of agents who have worked for companies such as Purplebricks, YOPA and many smaller ones in a self-employed capacity would be eligible to join the class action.
C4J spokesperson Peter Fletcher says: “HMRC and the courts are clear that just designating your staff as self-employed does not mean that you may operate those workers as employees in all but name just to save the company from paying holiday pay, statutory pension contributions and so on.
“In recent cases involving Amazon and Uber it’s been found that self-employed contractors were in fact workers in the eyes of the law.
“Our action against online estate agencies that may have designated their workers as self-employed when in fact they may not have been, is being commenced in a similar vein to these other well-known outcomes and therefore we are very confident of our success in reclaiming in some cases many thousands of pounds for the individuals concerned.”
The IR35 legislation seeks to prevent companies using full-time contractors and self-employed agents to do what would have traditionally been directly-employed roles.
“The sums involved that could be clawed back from these agencies by former self-employed agents are estimated to be approximately £20 million,” says Russell Quirk, whose PR company is handling the publicity for the class action.
Any legal case will revolve around whether the agents involved passed the test as bona fide self-employed suppliers or whether, in reality, they were staff in everything but name. Tests could include how much control the company had over a self-employed agent, whether targets were set, leads supplied directly and whether an agent’s work could have been done by someone else or only them.
Earlier this year Purplebricks brought all its self-employed LPEs and Territory Owners in-house as employees.
In response to the C4J announcement, a Purplebricks spokesperson says: “All Territory Operators entered into a commercial licence agreement and this was clearly set out in their contract with Purplebricks. We have always taken legal advice in regards to our licensing model – and the advice is very clear that these individuals were operating as limited companies, running their own business and with full control over their own staff.”
C4J says the initial basis of its class action centres upon the non-payment of holiday pay which C4J say previous and current workers may be due if it is proven that they were in fact employed for the purposes of the legal definition.
The claim will also seek to recover the workplace pension contributions that potentially should have been made by the ‘employer’. The sum total of just these two elements is 12.07% of each year’s earnings for the former and up to 8% for the latter, plus interest.
C4J stress that their action on behalf of agent individuals relates to business models that directed their agents ‘as if they were employed’. Hybrid agencies that merely ‘support’ self-employed agents such as Keller Williams, eXp, Nested and the like are deemed to operate a significantly ‘hands-off’ model and are likely to sit outside of any such claim.
Agents wishing to find out more should visit the C4J website.
“Following this and other recent high-profile cases, together with the well-publicised HMRC changes to the IR35 legislation in recent years, there is clearly a growing awareness of employment status in the workforce,” says Lee McIntyre-Hamilton of Keystone Law.
This growing awareness should be heeded as a warning to employers who are deliberately breaching the rules. However, more prominently, it will also no doubt cause concern for many employers who are genuinely trying to comply with the rules but, owing to their complexity and the fact that employment status is based largely on case law, may incorrectly assess the position.
The Negotiator has approached YOPA for comment.