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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Yorkshire Window Company Ltd v. Parkes [2010] UKEAT 0484_09_2705 (27 May 2010) URL: http://www.bailii.org/uk/cases/UKEAT/2010/0484_09_2705.html Cite as: [2010] UKEAT 0484_09_2705, [2010] UKEAT 484_9_2705

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APPEARANCES

 

For the Appellant	MR ADAM SOLOMON (of Counsel) Instructed by: Messrs Irwin Mitchell LLP Solicitors Riverside East 2 Millsands Sheffield S3 8DT
For the Respondent	MR STEVEN WHITE (of Counsel) Instructed by: Messrs Mills Kemp & Brown 1-11 Huddersfield Road Barnsley S70 2LP


 


SUMMARY

PRACTICE AND PROCEDURE – Time for appealing

WORKING TIME REGULATIONS – Worker

1. Where an Employment Tribunal has given Judgment in 2 or more tranches, a copy of the written record of the Judgment of the Employment Tribunal which is subject to appeal and the written reasons for the Judgment, or an explanation as to why written reasons are not included must be lodged with the Notice of Appeal in accordance with Employment Appeal Tribunal rule 3(1), and Employment Appeal Tribunal Practice Direction paragraph 2. Failure to comply with this requirement means that the appeal is not properly constituted. In future if a party fails to lodge copies of all relevant judgements or decisions the appeal will not be validly lodged and the Notice of Appeal will be rejected; see also practice statement of 3 February 2005.

2. In determining whether a person qualifies as a 'worker' within Regulation 2 of the Working Time Regulations 1998 the following principles are established by the authorities in relation to the determination of whether a contract provides for the provision of personal services.

(a), the question whether or not a contract provides for the performance of personal services is essentially a matter of construction,

(b), the court is concerned with construing the contract, rather than with general policy considerations,

(c), the fact that the individual chooses personally to supply the services is irrelevant; the issue is whether he is contractually obliged to do so,

(d), the right or obligation to employ a substitute will not necessarily mean that there is no obligation on the part of the "contractor" to perform personal services unless that right is unfettered,

(e), in cases where the "contractor" is unable, as opposed to unwilling, to carry out specified services, and has accepted an obligation to perform those services, but is unable to do so, and where he himself does not bear the costs of employing a substitute, a limited or occasional power of delegation may not be inconsistent with a contract to provide personal services,

(f), a worker holds an intermediate position between an employee and someone who carries on his own business undertaking.

HIS HONOUR JUDGE SEROTA QC

Introduction

1. This is an appeal by the Respondent, as we shall call it, from a decision at a pre-hearing review before Employment Judge Morgan in the Employment Tribunal at Sheffield dated 18 August 2009. He held that the Claimant, as we shall call him, was a "worker" within Regulation 2 of the Working Time Regulations 1998, and was not an employee within the meaning of Section 32 of the Employment Act 2002. Accordingly he determined that the Employment Tribunal had jurisdiction to entertain the Claimant's claim, which we understand to be presently limited to holiday pay. The appeal was referred to a full hearing by the President Underhill J on 13 November 2009, before a Judge and lay members.
2. Employment Judge Morgan had given an earlier decision on 19 June 2009 at which he had rejected the Claimant's case that he was an employee of the Respondent, and consequently dismissed his claim for constructive dismissal. He gave directions in relation to further submissions as to whether the Claimant was a worker within the meaning of Regulation 2 of the Working Time Regulations and whether there was jurisdiction to entertain the Claimant's claim in the absence of a grievance.
3. We have a note of the Judgment of 19 June 2009 (to which we will refer as the "first Judgment"). This note was agreed by the advocates who appeared, Mr White for the Claimant and the Respondent's solicitor Ms Whitfield. The position is not wholly satisfactory as parts of the note could not be transcribed as the advocates' notes were illegible and partly because the advocates did not make notes of the entire Judgement which has never been approved by the Employment Judge. It is, however, apparent from the agreed note that at a hearing, and after hearing oral evidence and considering the relevant documents and submissions, the Employment Judge set out to apply the three-part test to be found in Regulation 2 of the Working Time Regulations to consider whether or not the Claimant was a worker. He considered firstly whether the Claimant had worked under a contract, whether he had undertaken to do or perform personally any work or services for the Respondent and whether the status of the Respondent was not, by virtue of the contract, that of a client or customer of any profession or business undertaking carried on by the Claimant.
4. The Employment Judge concluded that there was a contractual relationship between the Claimant and the Respondent; this was not disputed. Contrary to the Respondent's case and submissions, the Claimant undertook to do or perform personally work or services for the Respondent. He did not, however, reach a conclusion as to whether the Claimant was carrying on a trade or business undertaking of which the Respondent was a client or customer. He, therefore, directed that the parties should lodge written submissions only (there was to be no further hearing) and the written submissions were to be limited to this last question.
5. The order that was drawn up by the Employment Tribunal did not accurately record the effect of the extempore Judgment and failed to make clear the Employment Judge had already determined there was a contractual relationship between the Claimant and the Respondent, that the Claimant was required to provide personal services, and also that written submissions should only be addressed to the issue of whether the Claimant carried on a trade or business undertaking, of which the Respondent was a client or customer.
6. Notwithstanding this error, the parties clearly understood the effect of the order and both provided written submissions (which we have considered) that were limited to the question as to whether the Claimant was carrying on such trade or business undertaking. It is a matter of great regret, and this is a matter to which we shall have to return, that no full transcript of the first Judgment is available or any written reasons for the Judgment. Such a transcript or written reasons, would have been highly relevant at the sift stage before Underhill J and, of course, would have been of the greatest assistance to us at the full hearing. In due course the Employment Judge produced the written Judgment of 18 August 2009 without, as we have said, hearing any further evidence or any further oral hearing.

The Factual Background

7. Prior to January 2002 the Claimant worked in the double glazing industry for a company known as Everest. He had registered his own business for VAT and tax purposes and filed accounts with the Inland Revenue to confirm his self-employed tax status. In January 2002 he joined the Respondent as one of its team of 12 salesmen.
8. The Respondent would provide referrals to the Claimant with consumers who wanted double glazing or similar work and the Claimant would earn commission from contracts that were entered into. A commission was paid when the customers paid their deposit. Between 2002 and 2008 the Claimant would submit invoices for commission which the Respondent would check and, in due course, would authorise payment. It is to be noted that on a number of occasions the Respondent would revisit the contract and reduce the price or change the specification and consequently reduce the commission payable to the Claimant. The Employment Judge was satisfied in those circumstances that the Respondent revisited the commission to protect its profit margin.
9. Leads were supplied to the Claimant on the evening before the appointment arranged with potential customers. These would be telephoned by the Respondent which allocated them among its various salesmen.
10. On or about 20 January 2005, after the Claimant had worked with the Respondent for some three years a new contract was entered into. It was not clear to what extent (if any) it purported to change existing terms. The Employment Judge described this contract as a curious hybrid. The Claimant objected to signing the contract and claimed that he had only done so under duress, fearing that if he refused to sign it he would lose referrals, but he did eventually succumb and signed.
11. We now turn to consider the terms of this contract. The contract describes the Claimant as a "self-employed salesman". We refer to a number of relevant conditions:

"2.1 The Salesman will be provided with details of potential customers of the Company ("leads") and his role is to obtain orders for the Company and not to enter into contracts on behalf of the Company with customers. Therefore:-

2.1.1 he is not entitled or authorised to enter into contracts to sell goods or services of the Company on behalf of the Company: and

2.1.2 he must not give the impression or represent that he has the authority to enter into contracts on behalf of the Company or allow any other person to give that impression or representation.

[…]

2.6 The Salesman is not required to work any particular number of hours or at any particular times but the Salesman shall, while undertaking his duties, use his best endeavours to promote the business of the Company and to obtain orders for the Company's goods and services and shall not at any other time during the terms of this Agreement do anything detrimental to the interests of the Company. The Company and the Salesman agree that there is no obligation either upon the Company to offer leads to the Salesman at any time, or upon the Salesman to accept leads offered at any time.

2.7 The Salesman confirms that, where he is offered leads which he wishes to accept, he must notify the Company immediately of his acceptance of the lead or leads when notified of their availability. The Salesman acknowledges that where he does not comply with this requirement, any such available leads may be offered to other Salesman without further notice to him.

2.8 The Salesman will notify the Company 48 hours in advance of any date or dates upon which he will not be available to provide services under this Agreement.

2.9 If the Salesman has accepted a lead or leads but is subsequently unable to attend any appointment for any reason, the Salesman must arrange directly with any other salesman to attend the appointment as a replacement, and if no other salesman can be found, the Salesman must then inform the Company. The Salesman must not fail to attend an accepted lead unless one of these alternative arrangements has been made not take any steps to alter the appointment time that the Company has arranged with the customer.

[…]

4.1 This clause 4 sets out the commission payments to which the Salesman may become entitled. The rates of commission payments are contained in the Commission Schedule which will be provided to the Salesman by the Company upon the Salesman's acceptance in writing of the terms of this Agreement. The Company reserves the right to vary its commission structure and rates at any time by notice to the Salesman and in particular may vary the monthly rates of interest payable by the customer and any commission payable in connection with such rates as varied from time to time.

[…]

6.1 The Company acknowledges that the Salesman is an independent contractor as set out at Clause 7 below and as such the Company confirms that the Salesman may be engaged in the provision of any other work, whether employed or self-employed at any time during the duration of this Agreement, save that the Salesman specifically undertakes not to work for any other company providing similar goods or services as the Company, for the duration of this Agreement and for the duration of the period set out at Clause 6.2 below.

6.2 The Salesman agrees that he shall not during the term of this Agreement or within 3 calendar months afterwards, whether by himself or as consultant, principal, partner, employee, officer or a company or otherwise directly or indirectly:-

6.2.1 solicit or accept orders for the supply of goods or services the same as similar to or competitive with any of the goods or services of the Company which the Salesman is retained to solicit or obtain orders for under this Agreement (as may be varied from time to time).

PROVIDED THAT in relation to the Salesman's obligations in the 3 calendar month period after the termination of this Agreement, this clause 6.2.1 shall only restrict the Salesman from soliciting or accepting orders for goods or services supplied by the Company in the six months immediately prior to the termination of this Agreement:-

(a) from persons who have been or are customers of the Company and with whom the Salesman had had any contact in any way relating to the provision of services under this Agreement within the period of 12 months prior to the termination of this Agreement; and

(b) from persons who are potential customers of the Company and who, to the knowledge of the Salesman obtained during the term of the Agreement and by reason of his retention under this Agreement, indicated within the period of 12 months prior to the termination of this Agreement an interest in purchasing any goods and/or services to which the restrictions in this clause 6.2.1 relate.

6.2.2 enter into competition with the Company or any subsidiary or holding company of the Company. In relation to the Salesman's obligations in the 3 calendar month period after the term of this Agreement, this restriction shall only apply within any area notified to him by the Company and within which he has provided services under this Agreement within the Period of 12 months prior to the termination of this Agreement.

[…]

7. The Salesman shall be an independent contractor and not a servant employee or worker of the Company and in such a capacity the Salesman shall bear exclusive responsibility for the payment of his national contributions as a self-employed person and for discharge of any income tax and (subject to clause (8) VAT liability arising out of remuneration for work performed by him under this Agreement). The Salesman specifically acknowledges that he is not a "worker" within the definition of the Working Time Regulations 1998."

12. The Claimant could have accepted leads for non-domestic contracts but chose not to do so because they paid a lower rate of commission and he concentrated on domestic contracts. The Employment Judge (first Judgment, page 2) found that the Claimant was entitled to reject referrals and that he did so, in which case the leads would be reallocated by the Respondent to another salesman.
13. We now turn to various matters forming part of the first Judgment. The Claimant's allegation that he signed the contract under economic duress was rejected by the Employment Judge. The Employment Judge also found that the Claimant was requested to undertake duties outside of the role of salesman and he resisted. He in particular rejected the suggestion he should attend the showroom and this led to him tendering his resignation on 14 November 2008 and to his claim for unfair dismissal and breach of contract.
14. The Employment Judge (page 3) rejected the case that the Claimant was an employee, although there was a degree of mutuality in his relationship with the Respondent. He directed himself by reference to the well-known decision in Carmichael v National Power PLC [1999] ICR 1226 and considered the question as to whether the Claimant was an employee on a "multi-factual" basis. He considered how the parties had conducted themselves and rejected the Claimant's case that he was an employee in particular because he had treated himself as self-employed in relation to VAT, income tax and prepared accounts on that basis. He was entitled to refuse referrals and could elect which leads he wished to pursue.
15. The Employment Judge then turned at page 4 to consider if the Claimant was a worker within the meaning of Regulation 2 of the Working Time Regulations; he referred to the definition of "worker", to which we will turn in due course. He recognised the need for there to be a contractual relationship, an obligation to perform work personally and for him to consider whether the Claimant was carrying on a trade or business undertaking of which the Respondent was a client or customer. As we have already mentioned there was no issue as to whether there was a contractual relationship between the parties. The Employment Judge, the agreed note records, had this to say in relation to the obligation to carry out work personally:

"I am satisfied that it was incumbent on the Claimant to carry out the work personally. I am satisfied that there was no real scope to nominate/subcontract the performance of the work … (advocate's notes illegible). He could not tender others to do the work. He could not bill for work done by others."

16. The Employment Judge then went on to consider whether the Claimant was carrying out any profession or business. His provisional view was that the Claimant was not pursuing a business with the Respondent. The Employment Judge said:

"A business is a commercial venture aimed to profit. Taking a purposive approach, and looking at the mischief to which the Regulations are directed, my provisional view is that business/client anticipates that the worker is carrying out activities for a wide class of beneficiaries or has the opportunity to do so …"

17. The Employment Judge provisionally concluded that the Claimant was a "worker" but he held over his decision pending submissions on the interpretation of the phrase "profession or business undertaking" and whether or not there was jurisdiction to entertain the Claimant's claim in the absence of his having raised a grievance.
18. I should also note that the Employment Judge referred (at page 5) to certain payments of less than £1,000 recorded in the Claimant's accounts as "commissions". The Claimant had explained what they represented; we were told these were "thank you" payments to certain customers and payments to others who introduced possible leads to him so they were shown as commissions upon the advice of his accountant. The Employment Judge noted that the Claimant was not an accountant and he had sympathy for this "why buy a dog and bark yourself?". In the bundle there is a note of evidence it is agreed the Claimant had given in relation to commission paid to persons who gave him leads.
19. The Claimant maintains (and Mr White's note corroborates this) that he had also said he had made the "thank you" payments to customers which the accountant advised him to record as commissions. The Respondent was not prepared to accept the accuracy of this part of the note and the Claimant declined to accept the evidence in relation to commission paid to persons supplying him with leads unless the evidence relating to the "thank you" payments was also accepted. In the absence of any agreement between the parties, although we do not consider these matters are of more than little importance, we are minded to ignore that evidence. It is unfortunate that if the parties were unable to agree the necessary evidence they did not apply as provided for in paragraph 4 of the order of Underhill J of 13 November 2009 for the notes of the Employment Judge.

The Second Decision of the Employment Judge, 18 August 2009

20. The Employment Judge recorded that there were two issues for consideration; firstly, was the Claimant a worker within the meaning of Regulation 2 of the Working Time Regulations, and secondly, what was the effect of his failing to lodge a grievance? The Employment Judge was satisfied that the Claimant was a worker. He preferred the Claimant's submissions and noted the protective nature of the legislations; he referred to Byrne Brothers v Baird [2002] ICR 667 and the distinction between independence being notionally present or genuinely accommodated.
21. He also noted that the fact that the Claimant was recognised by the Inland Revenue as being self-employed was important but not decisive. He also referred to Redrow Homes (Yorkshire) v Wright [2004] ICR 1126 to the effect that Employment Tribunal should not be deflected from determining whether the Claimant was a worker on the construction of the contract by general policy decisions. He also referred to Bacica v Muir [2006] IRLR which had been relied upon by the Respondent for the proposition that the mere rendering of a service was not sufficient to categorise an individual as a "worker" but determination was one of fact and the work undertaken by the Claimant was one facet of the services carried on by him.
22. Reference was also made to Inland Revenue v Post Office [2003] IRLR 199 (Burton J) where it was held that sub-postmasters were neither employed nor "workers". He directed himself that it was not necessary for a business undertaking to antedate or be independent of the contract falling to be construed. Finally he referred to James v Redcats (Brands) [2007] IRLR 297 (Elias J) and drew attention to the necessity of ascertaining the essence of the instant contract and to consider notions of independence and freedom by a reference to the terms of the contract.
23. The Employment Judge concluded as follows:

"It was necessary to determine the question as to whether the Claimant was a worker on a fact-sensitive basis."

He was satisfied that the Claimant provided services to the Respondent and was required to undertake the work personally. He was presented to clients as a representative of the Respondent and wore the Respondent's uniform. Also he had no right to payment until the transaction reached the stage determined by the Respondent, and even then there was a risk of reduction in his commission. There were restrictions in the contact preventing the Claimant from undertaking work for third parties. There was no evidence that he ever did so during the currency of the contract.

24. The Claimant's accounts provided no reliable indication of whether he did so. The Claimant was not conducting a business enterprise of a general character to the benefit of a larger class of beneficiaries. The Claimant was required to confine his services to the Respondent and did so as the terms of the contract made clear. Having referred to the speech of Lord Hoffman in Investors Compensation Scheme v West Bromwich Building Society [1998] 1WLR construed the contract between the parties as providing that the Claimant was in fact "a worker". He went on to consider the grievance point and found that Section 32 of the Employment Act 2002 did not apply; there is no appeal against this part of the decision and we say no more about it.
25. We have already referred to the regrettable fact that there is no transcript or Judgment available in relation to the first decision of the Employment Judge. The note that we have had is somewhat unsatisfactory. The Claimant took the point that a full copy of the decision appealed against had not been lodged so that the appeal was not properly constituted. The Respondent responded by saying that it was only appealing against the second decision and that an appeal lay only against an order and that an appeal was not permissible where the order was not challenged, but the reasons were; Mr Solomon, who appeared on behalf of the Respondent, relied on the decision of May J in Harrod v Ministry of Defence [1981] 1ICR 8 at page 12:

"Having considered the matter carefully, however, we have come to the conclusion that it is inherent in any appeal that the appellant must be seeking to set aside the decision, judgment or order, whatever it may have been of the tribunal below, and that it would need very clear words to entitle a party to any proceedings to appeal to an appellate tribunal on the basis that although the decision below was right, nevertheless the reasons for it were wrong."

26. We, therefore, turn to the Employment Appeal Tribunal Rules; rule 3(1) provides as follows:

"Institution of appeal

3 (1) Every appeal to the Appeal Tribunal shall, subject to paragraphs (2) and (4), be instituted by serving on the Tribunal the following documents–……………

(c) in the case of an appeal from a judgment of an employment tribunal a copy of the written record of the judgment of the employment tribunal which is subject to appeal and the written reasons for the judgment, or an explanation as to why written reasons are not included; Institution of appeal."

27. The matter is also referred to in the Employment Appeal Tribunal Practice Direction at paragraph 2:

"1. The attention of litigants and practitioners in the Employment Appeal Tribunal is expressly drawn to the wording and effect of Rules 3(1)(b) and 3(3) of the Employment Appeal Tribunal Rules (1993) (as amended). As is quite clear from the terms of paragraph 2.1 of the Employment Appeal Tribunal Practice Direction 2004 handed down on 9 December 2004, a Notice of Appeal without the specified documentation will not be validly lodged. The documentation required to accompany the Notice of Appeal in order for it to be valid now includes a copy of the Claim (ET1) and the Response (ET3) in the Employment Tribunal proceedings appealed from, if such be available to the appellant, and in any event if such not be available for whatever reason then a written explanation as to why they are not provided. Paragraph 2.1 of the Practice Direction makes this entirely clear:

2.1 Copies of the judgment, decision or order appealed against and of the Employment

Tribunal's written reasons, together with a copy of the Claim (ET1) and the Response (ET3) must be attached, or if not, a written explanation must be given. A Notice of Appeal without such documentation will not be validly lodged.

2. The reported decision of the Employment Appeal Tribunal in Kanapathiar v London Borough of Harrow [2003] IRLR 571 made quite clear that the effect of failure to lodge documents required by the Rules with the Notice of Appeal within the time limit specified for lodging of a Notice of Appeal would mean that the Notice of Appeal had not been validly lodged in time. The same now applies to the additional documents required by the amended Rule, namely the Claim and the Response."

28. We also need to refer to the practice statement of 3 February 2005 which bears consideration in this regard. The practice statement makes clear that the requirements for lodging appropriate documents were not being complied with and that state of affairs would not be allowed to continue. The practice statement continued:

"This Statement in open court is to re-emphasise these requirements and the consequence of failure to comply with them, namely that an appeal not lodged within the 42 days validly constituted, i.e. accompanied by the required documents, will be out of time, and extensions of time are only exceptionally granted (see paragraph 3.7 of the Practice Direction)."

29. It must be clearly stated that appeals to the Employment Appeal Tribunal are commonly held to be out of time by reason of failure of the Appellant to lodge all necessary documents, including reasons. The Respondent is correct in saying that an appeal can only be made against an order, not against reasons, but Mr Solomon's submission misses the point. The reasons for the decision of 18 August include those of 19 June. Mr Solomon has sought valiantly to argue that the Judgment of 18 August is entirely freestanding and independent of the extempore Judgment. A reading of the Judgment makes this an impossible submission. The order of 19 June 2009 could have been more carefully drawn and should have made clear that the Employment Judge had reached conclusions on certain issues that are relevant to the decision of whether the Claimant was a worker, but this is besides the point.
30. There was only one hearing when evidence was heard and the second decision of the Employment Judge was based only on limited written submissions in addition to the evidence of submissions that had been received earlier. Both parties clearly understood the Employment Judge only wanted written submissions on a part of the definition of the term "worker" (trade or business undertaking) and that he had already decided the issues of contract and personal service. It is clear that the Employment Judge's findings as to fact in the first decision are fuller and more comprehensive than in his second decision and set the scene for the later analysis by him of the law and its application to the facts. Even though the Employment Judge in his second Judgment touched on matters he had already decided we have no doubt that this was a decision in which his reasons are recorded in two separate judgments. Accordingly the reasons for the decision of 19 June should have been lodged and the appeal is not properly constituted.
31. At the end of the day the Claimant did not wish to take the point and we shall, therefore, deal with the appeal on its merits, but we wish to make it clear that if in any future case where an Employment Tribunal has given a decision in more than one tranche so as to speak, the reasons for each decision must be served with a Notice of Appeal or it is likely the appeal will be held not to have been properly constituted and will not be accepted.
32. Before we turn to consider the Notice of Appeal and the arguments in support we note that in the light of the findings that the Claimant was not an employee, against which there is no appeal, it is likely that the only live issue on remedy will be for a modest amount of holiday pay.

Notice of Appeal Submissions in Support

33. We invited Mr Solomon to make any submissions as to the effect of the recent decision of the Court of Appeal in Autoclenz v Belcher [2009] EWCA Civ 1046. He submitted that the decision was of no relevance because the parties had argued the case before the Employment Tribunal on the basis that their intention was apparent from the written agreement. He relied on various passages to which we will refer shortly, stressing that the essential point for determination of the relationship between the parties was the contract. The fact that the parties behaved after the contract in a particular way does not mean that it is legitimate to use that behaviour as an aid to construction of the contract. The Court of Appeal suggested that matters arising after the contract could only be relied upon to show a variation of the contract, the present case came nowhere close to that.
34. Mr Solomon's first point was that the Employment Tribunal had failed to consider the issue of personal performance or that its decision was perverse. Mr Solomon relied on the terms of the contract and, in particular, the label, although not determinative, described the Claimant as being a self-employed salesman. He drew our attention to the terms of the contract to which we have already referred and stressed that the Respondent had no obligation to provide the Claimant with work and the Claimant had no obligation to accept work. He submitted that the contract entitled the Claimant to provide a substitute if he did not work himself. It was irrelevant to the Respondent who did the work (so long, we would observe, as it was one of its salesmen).
35. Mr Solomon submitted that the ability to provide a substitute showed there was no obligation to provide personal service; he relied upon the Judgment of Peter Gibson LJ in Express & Echo Publishers v Tanton [1999] IRLR 367. He also referred to Premier Groundwork v Jozsa UKEAT/0494/08 and England v MPG Contracts UKEAT/0488/08 and the decision of a Court of Appeal in Redrow Homes v Wright [2004] ICR 1126 and 1133G to 1134B.
36. The Employment Judge, it was said, had ignored the effect of the substitution clause (2:9):

"If the salesman has accepted a lead or leads but it subsequently unable to attend any appointment for any reason …"

37. The term "unable" would include the Claimant being unwilling because, Mr Solomon submitted, if the Claimant was unwilling to work he was unable to work. There was no distinction between finding the substitute and paying the substitute in the cases where the substitute is paid directly by the Respondent. The fact that the substitute was to be paid for by the Claimant in Tanton was irrelevant. What was important was the power to substitute. The various cases had different conclusions because of the difference in the substitution clauses, not because the substitution was in effect a subcontract or transfer to a pre-approved contractor.
38. These were factors to be taken into account but only in construing the scope of the power to substitute; he drew our attention to what Elias J had said in Redcats in relation to the scope of a clause permitting substitution where a Claimant was "unable or unwilling" to do the necessary work. In the present case there was no requirement to get prior consent to substitute. The dominant purpose of the contract was to get the work done not to determine whether the Claimant was a worker or an independent contractor. He submitted that the view to the contrary of Elias J in Redcats at 1018A to C (59), which was not considered by the Employment Judge, he would, if necessary, argue was wrongly decided. We will refer to the relevant passage later in this Judgment. Mr Solomon also suggested that the reasoning of the Employment Judge on this issue was incoherent.
39. The second ground of appeal relied upon by Mr Solomon was to the effect that the Employment Tribunal was in error in holding that the Claimant was required to confine his commercial activities to working for the Respondent. Mr Solomon submitted that clause 6:1 of the agreement clearly permitted the Claimant to work for persons other than the Respondent. This error was critical to the decision of the Employment Judge. The Claimant was not in business on his own account and that he was entitled to carry out other work was a significant matter in determining the question whether he was in business on his own account.
40. The terms of the contract determined whether he was in business on his own account, whether he in fact had other work or not. It might also be necessary to examine the facts on the ground if the business was not created by the contract, for example, whether the Claimant was self-employed and accounted for VAT. The fact that the Claimant did work personally did not mean that he was required to do that work personally. If this submission were correct, it would be necessary for the case to be remitted to the Employment Tribunal as relevant facts have not been found and the Employment Appeal Tribunal could not make the necessary findings.
41. It was then submitted that the Employment Judge had failed to consider various relevant matters on the question of whether or not the Claimant was carrying on the business undertaking. Mr Solomon pointed to the evidence of payments from the Claimant's bank account for work done and relied upon the evidence that he would pay commission to other salesmen for work; we note that the Employment Tribunal at paragraph 16 had held that the Claimant's accounts were an unreliable indication of whether he did other work. Mr Solomon submitted that the commission were evidence the Claimant worked on his own account and it was inadmissible for the Employment Judge to have regard to post-contractual matters to construe the contract. The fact that the Claimant was registered for VAT was ignored.
42. The final ground of appeal suggested that the Employment Tribunal was in breach of Employment Tribunal Rule 30:6 in that it had failed to identify all relevant issues and make findings on all issues of fact relevant to the issues that required to be determined. The second Judgment of the Employment Tribunal should be treated on its own terms and it lacked sufficient reasoning. The second Judgment was the only relevant Judgment and all relevant facts should have been set out in that Judgment. It was not "Meek" compliant.

The Claimant's Submissions

43. Mr White submitted that the decision of the Employment Tribunal is contained both in its original Judgment of 19 June and in the Judgment of 18 August. It is clear there was continuity of judicial thinking and it was necessary for the Judgments to be read together. He drew attention to the fact that the second decision was limited by the first decision as was understood by the parties who limited their submissions to the question of business undertaking. In relation to the question of personal service, this was dealt with in greater detail at page 4 of the first decision of the Employment Tribunal and the reference in paragraph 15 of the second decision did not represent a fresh finding of fact, but was looking back to the more detailed findings already made by the Employment Judge.
44. In relation to the issue of personal service, this, as we have already recorded, Mr White submitted was dealt with in the first decision. Mr White pointed out that the Claimant was precluded from working in the double glazing field for anyone else, not only during the course of his employment with the Respondent but for three months thereafter. He was required to give 48 hours notice of unavailability; there was no evidence that he or any other salesman had ever worked for third parties because the contract terms and practical realities precluded this. Mr White drew our attention to the passages in the first Judgment to the effect that the terms of the agreement were firmly in the Respondent's favour, highly exclusive and made it extremely difficult for a person to pursue any other occupation. He pointed to the Employment Judge's finding at paragraph 16 of the second Judgment:

"Similarly, there were express restrictions within the written contract between the parties which precluded the Claimant - in what is a highly specialised and competitive business - from undertaking work on behalf of third parties. There was no evidence before the Tribunal to the effect that he did so during the currency of this relationship. In this respect, the annotation of commissions within the Claimant's accounts do not provide any reliable indication of whether in fact, the Claimant was undertaking such work or indeed, was permitted to do so by the Respondent."

45. The Claimant could not simply choose whether to carry out the assignment once he had accepted it. The evidence was that the Claimant had never arranged cover in six years and eight months of work with the Respondent or had ever split commission with a replacement salesman. Accordingly the Employment Tribunal was entitled to conclude that there was no "meaningful challenge" on the issue of personal service. Further, the contract did not allow substitution. What was permitted was that leads were distributed to other salesmen and the Respondent's only other salesmen are also members of the self-employed sales force, 12 in number. The Tanton Decision was distinguishable because there was a much broader right to delegate.
46. In relation to the second ground of appeal raised by the Respondent, the Employment Tribunal was in error in holding the Claimant was required to confine his activities to the Respondent, Mr White again submitted the Employment Judge was quite correct on the findings that he was entitled to make and had made. The facts relevant to the first ground were also relevant here, as were the contractual provisions. He relied upon pages 3 to 5 of the first Judgment of the Employment Judge and paragraphs 16 and 17 of the second decision. The Employment Judge was correct in seeing how limited the right to work for third parties was. The Claimant could only work for third parties provided he undertook work outside the only area of his expertise, namely the double glazing industry.
47. The Employment Judge had dealt with commission payments said to have been made by the Claimant. He referred to the passage at page 5 of the first Judgment and to paragraphs 9 and 16 of the second Judgment. The Employment Judge had also considered the relevant contractual provisions and the Claimant's self-employed status, so far as the Revenue was concerned. He relied on the decision in Byrne Brothers (Formwork) Ltd v Baird and ors [2001] UKEAT/0542/01. Further, any commission paid by the Claimant was for business introduced to the Respondent. The Employment Judge correctly adopted a multi-faceted approach and was entitled to conclude as he did.
48. In relation to the question whether the Claimant was carrying on a business undertaking the evidence, such as it was, was considered by the Employment Judge. He had correctly directed himself as to the hybrid nature of the contract, the bias of its terms in favour of the Respondent and the fact that labels were not determinative. The Employment Tribunal had correctly directed the role of the Employment Tribunal in this regard to ascertain the essence of the contract as made clear by Elias J in Redcats; see second decision paragraph 13. The Employment Tribunal had clearly taken into account the fact that the Claimant paid VAT and was self employed but had correctly noted that the views of HMRC were not conclusive.
49. In relation to the question as to whether the decision was "Meek" compliant Mr White submitted that taking account of both decisions together, the decision was clearly compliant both with Rule 30:6 and with decisions such as Meek.

The Relevant Law

50. Regulation 2 of the Working Time Regulations 1998 defines the term "worker" as follows:

"Worker" means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

[a]     a contract of employment; or

[b]     any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;

and any reference to a worker's contract shall be construed accordingly."

There are identical definitions in Section 54:3 of the National Minimum Wage Act 1998 and in Section 230 of the Employment Rights Act 1996.

51. We have considered the effect of the Decision in Autoclenz v Belcher [2009] EWCA Civ 1046 which was decided after the decision of the Employment Tribunal in this case. We understand this case has gone to the Supreme Court. The Court of Appeal considered a number of matters, and held, inter alia, that when determining the intention of the parties to what might loosely be described as a contract of employment, if one party asserted that a written term was not intended to be effective there was no need for him to go so far as to seek rectification or assert that term in question was a sham. The Court of Appeal also stressed that the mere fact that the parties conducted themselves a particular way did not in itself mean that conduct accurately reflected their legal rights and obligations. For example, there could well be a legal right to provide a substitute worker and the fact that that right was never exercised in practice does not mean that it was not a genuine right.
52. The Court of Appeal, nonetheless, stressed the importance of the written terms. This case was argued before the Employment Tribunal on the basis solely of the construction of the contract against the relevant matrix of fact. There was no argument before the Employment Tribunal that any term did not represent that intention of the parties.
53. The Court of Appeal gave some helpful guidance as to the approach that should be undertaken in relation to the question whether an individual had undertaken to perform personally any work or services under Section 230(3) and again Smith LJ had this to say at paragraph 10:

"The starting point must be the statutory provision at section 230(3) and the first question is whether, under the contractual arrangements, the individual has; 'undertaken to perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of; any professional or business undertaking carried on by the individual'. Two separate issues arise. Is the individual contractually obliged to carry out the work or perform the services himself or does the contract permit him to provide someone else to perform them? If the individual is free to choose whether he will do the work himself or send someone else to do it, he is not under an obligation to do the work personally; and will not be a limb (b) worker. (Nor will he be an employee or limb (a) worker because an obligation to perform work personally is also an essential requirement of a contract of employment.) But in addition to there being an obligation to perform the work personally, the work must not be done for the other party in the capacity of client or customer. So, even if the individual is under an obligation to perform the work personally, that is not of itself enough to make him a worker. He might not be a worker because he could be providing a personal service as a self-employed contractor to a customer of his business. The customer might have engaged the self employed individual on the basis that he would carry out the work personally. So, in order for the individual to be a worker, both criteria must be satisfied."

54. We also derived assistance from the Judgment of Aikens LJ at paragraph 74:

"74. As Smith LJ has stated in her judgment, section 230(3)(b) of the ERA sets out the statutory definition of a "worker" and that sub-section divides "workers" into two sub-groups. Paragraph (a) states that an individual who has entered into or works under a "contract of employment" is a "worker". So, as Smith LJ states, an employee is a "sub-group" of "worker"…………………….

75. The second "sub-group" of "worker" is a person who fulfils the requirements set out in paragraph (b) of section 230(3) of the ERA. This type of "worker" will only be within the sub-group if he fulfils the statutory definition set out in paragraph (b). There are three requirements. Two are positive and one is negative. First, the worker has to be an individual who has entered into or works under a contract with another party for work or services………………………………….

76. The second requirement of the statutory definition in paragraph (b) of section 230(3) is that the individual undertakes to do or perform personally the work or services for the other party. If, under the express or implied contract, the parties have agreed a contractual term whereby the individual can sub-contract performance of the work or services to another person, then the individual will not have undertaken to perform the work or services personally and so will not be within the definition of "worker" set out in paragraph (b).

77. The third requirement relates to the status of the other party to the contract. That other party must not, by virtue of the contract, have the status of a client or customer of any profession or business undertaking carried on by the individual who is to perform the work or services. No further explanation of what is meant by a client or customer of a profession or business undertaking is given, but, in most cases at least, it is easy enough to recognise someone who has this status. It includes, for example, the solicitor or accountant's client or a customer who seeks and obtains services of a business undertaking such as from an insurance broker or pensions adviser. "

55. As we have noted, however, the Court of Appeal stressed that the starting point must be the written terms: Smith LJ had this to say at paragraph 14:

"Where contractual terms are in writing, they will usually be taken as representing the agreement between the parties, but, if one party to the agreement claims that the written terms do not represent the true agreement, the court will have to decide what the true agreement was. In the present case, there are contractual documents. Autoclenz contends that the terms set out in the documents properly reflect the nature; of the contractual relationship. The claimants contend that they do not and that the; true agreement was quite different. The correct approach to determining the true nature of an agreement has been the subject of discussion in several recent cases including two in the Court of Appeal. It will be necessary to discuss these cases in some detail later. However, for present purposes, I do not think it is contentious to cite briefly from my own judgment in Protectacoat Firthglow Ltd v Szilagyi [2009] IRLR 365 at paragraph 57:

"In a case involving a written contract, the tribunal will ordinarily regard the documents as the starting point and will ask itself what legal rights and obligations the written agreement creates. But it may then have to ask whether the parties ever realistically intended or envisaged that its terms, particularly the essential terms, would be carried out as written. By the essential terms, I mean those terms which are central to the nature of the relationship, namely mutuality of obligation: Carmichael v National Power [2000] IRLR 43 and the obligation of personal performance of the work."

56. For the sake of completeness we would also set out what Smith LJ had to say at paragraph 69:

"It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee. I can see that the argument of the employee is rather less attractive where, for many years, he accepts that he is a self- employed contractor and benefits from the rather more favourable taxation arrangements which are available to people running their own businesses. However, it seems to me that, even where the arrangement has been allowed to continue for many years without question on either side, once the courts are asked to determine the question of status, they must do so on the basis of the true legal position, regardless of what the parties had been content to accept over the years. In short I do not think that an employee should be estopped from contending that he is an employee merely because he has been content to accept self employed status for some years."

Finally, in this regard we would also refer to Aikens' LJ Judgment at paragraph 91:

"Speaking for myself, I would respectfully suggest that it is not helpful to say that a court or tribunal has to consider whether the words of the written contract represent the "true intention" or the "true expectation" of the parties. There is a danger that a court or tribunal might concentrate too much on what were the private intentions or expectations of the parties. What the parties privately intended or expected (either before or after the contract was agreed) may be evidence of what, objectively discerned, was actually agreed between the parties: see Lord Hoffmann's speech in the Chartbrook case at [64] to [65]. But ultimately what matters is only what was agreed, either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded. I accept, of course, that the agreement may not be express; it may be implied. But the court or tribunal's task is still to ascertain what was agreed."

57. We start by considering a number of cases involving the concept of personal service or the obligation to provide services personally. It has long been recognised that a limited or occasional power of delegation is not necessarily consistent with a contract of service; in the well-known case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, MacKenna J said at page 515 in a frequently quoted passage:

"A contract of service exists if these three conditions are fulfilled:

The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. … The servant must be obliged to provide his own work and skill. Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be [emphasis supplied]: see Atiyah's Vicarious Liability in the Law of Torts (1967) pp. 59-61 and the cases cited by him."

58. The citation from Professor Atiyah's book is set out in full in Byrne Brothers v Baird & Others (Recorder Underhill) [2001] UKEAT/542 to which we shall come shortly.
59. The first case we need to consider is one that was relied upon heavily by the Respondent, the decision of the Court of Appeal in Express & Echo Publications v Tanton [1999] ICR 693. The court had to consider the effect of a contract between newspaper publishers and a delivery driver under what purported to be a contract for services. Clause 3 of that agreement provided as follows:

"In the event that the contractor is unable or unwilling to perform the services personally he shall arrange at his own expense entirely for another suitable person to perform the services." To this I should add what was contained in paragraph 13 of the schedule, where it is stated: "In the event that the contractor provides a relief driver, the contractor must satisfy the company that such a relief driver is trained and is suitable to undertake the services."

60. Peter Gibson LJ at 698A analysed the agreement as follows and drew particular attention to the Claimant's entitlement not to perform services if "unwilling" to do so:

"I am inclined to think that the chairman did treat the relevant agreement as being one on the terms set out in the agreement for services, save for the two provisions in the schedule, the obligations of which were not enforced. Whether that is right or not in the event does not matter because it is clear that the chairman found the provisions of clause 3.3 to be part of the agreement between the company and the applicant. On its face, clause 3.3 enabled the applicant, if he were at any time unwilling [our italics] to perform the specified services personally, not to perform those services himself, but to obtain the performance of the services through an acceptable substitute. That is a remarkable clause to find in a contract of service. In Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, 515 MacKenna J expressed his views on what is meant by a contract of service. He said:

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

"As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be: see Atiyah's Vicarious Liability in the Law of Torts (1967), pp. 59-61 and the cases cited by him."

61. Tanton was considered by the EAT (Lindsay P) in MacFarlane v Glasgow City Council [2001] IRLR 7. In this case the Claimants worked as gymnastic coaches for the Respondent. The relevant contractual provision was as follows:

"If for any reason, one of the applicants was unable to take a class, she would contact a replacement from the register of coaches maintained by the respondents, and arrange for her class to be covered by a member on the register."

62. The Employment Appeal Tribunal noted that it was the applicant who was enabled to select the replacement coach rather than the Respondent council, but that the substitute had to come from the council's list. The arrangement for the replacement was made by the applicant, not by the council. It is to be noted, too, that the provision for substitution would only be available where an applicant was "unable" to take a class, albeit that the inability could be "for any reason". Lindsay J distinguished Tanton:

The Tanton case is in our judgment distinguishable from that at hand for at least the following cumulative reasons. Firstly, the Appellants in our case could not simply choose not to attend or not to work in person. Only if an Appellant was unable to attend could she arrange for another to take her class. Secondly, she could not provide anyone who was suitable as a replacement for her but only someone from the Council's own register. To that extent the Council could veto a replacement and also could ensure that such persons as were named on the register were persons in whom the Council could repose trust and confidence. Thirdly, the Council itself sometimes organised the replacement (without, it seems, protest from the Appellant concerned that it had no right to do so). Fourthly, the Council did not pay the Appellants for time served by a substitute but instead paid the substitute direct. There is no finding as to what the substitutes were paid nor that they were paid the same as the Appellants nor that the Appellants had any say in what the substitutes were paid. These four grounds in our view provide ample reasons for the Tanton case to be distinguished but unfortunately only the last of the four was considered by the Tribunal in our case."

63. We also refer to paragraph 13 of the decision in which Lindsay J said:

"The relevant clause in Tanton was extreme. The individual there, at his own choice, need never turn up for work. He could, moreover, profit from his absence if he could find a cheaper substitute. He could choose the substitute and then in effect he would be the master. Properly regarded, Tanton does not oblige the Tribunal to conclude that under a contract of service the individual has, always and in every event, however exceptional, personally to provide his services."

64. The similarities between MacFarlane and the present case are clear, although the Employment Appeal Tribunal in MacFarlane did not decide that the Claimants were employees but remitted the matter for further consideration by the Employment Tribunal.
65. We now turn to the decision in Byrne Brothers v Baird & Others (Mr Recorder Underhill QC) [2001] UKEAT/0542. In that case the Employment Tribunal found that a number of carpenters employed under contracts and provided in terms they were to be self-employed subcontractors were "workers"; in that case the substitution clause was as follows:

"The sub-contractor is free to employ at his own cost whatever suitably trained additional labour which may be necessary to fulfil the requirements of the Agreement. Where the sub-contractor is unable to provide the Services the sub-contractor may provide an alternative worker to undertake the Services but only having first obtained the express approval of the Contractor."

66. The Employment Tribunal did not construe the phrase: "Where [he] is unable to provide the services" as allowing the Claimants to provide a substitute whenever they chose; the substitute could only be used with the prior consent of Byrne. The Employment Appeal Tribunal upheld the decision that the Claimants were "workers". At paragraph 18 Mr Recorder Underhill QC observed:

"The fact that such a subcontractor may be regarded by the Inland Revenue as self-employed, and hold certificates to prove it, is relevant but not decisive."

67. The next authority to which we need to refer is Premier Groundworks v Jozsa [2009] UKEAT/0494/08. The Employment Appeal Tribunal [Silber J] construed a contract in which a ground-worker contracted with an engineering contractor to carry out ground works on terms that he would be regarded as self-employed and that:

'…..shall have the right to delegate performance of [ground works] services under this agreement to other persons whether or not his employees provided that [the respondent] is notified in advance and provided that any such person is at least capable experienced and qualified as [the claimant] himself."

68. Silber J at paragraph 25, having reviewed a number of authorities to which we have already referred, concluded:

"In conclusion, we consider that where a party has an unfettered right for any reason not to personally perform the contractual obligations under a contract but can delegate them to someone else, he cannot be a "worker" within the meaning of the WTR even though the person actually performing the contractual obligations has to meet certain conditions. The position would be different if the right not to perform the contractual obligation depended on some other event such as where that party was "unable" to perform his or her obligations."

69. In the circumstances it was held that the ground-workers were not "workers".
70. We now turn to consider Redrow Homes v Wright [2004] ICR 1126. This case concerned the question whether self-employed bricklayers working for house builders were "workers". Their respective contracts provided that they should be regarded as self-employed and could employ their own labour. Contracts were offered to some 70 bricklayers and the Employment Tribunal found in fact that they were workers and that there was an expectation that they would provide personal services whatever the written terms said. The Court of Appeal cited the decision of Mr Recorder Underhill QC as he was in Byrne Brothers (Formwork) Ltd v Baird [2002] IRLR in which he had suggested the policy considerations were relevant because there was a statutory intention to provide protection to "workers". This approach did not find favour with the Court of Appeal.
71. Pill LJ said at paragraph 21:

"21…Mr Stafford submits that, in concluding that clause 6 did not apply to these applicants, the EAT has made the same mistake as the Employment Tribunals; they have relied on what happened subsequently and how the contracts were performed instead of considering what had been agreed. An expectation that the work would be done personally, which Mr Stafford accepts was present, is not an obligation to do the work personally.

22…In my judgment there is force in the submission that Employment Tribunals should not be deflected from a consideration of the definition of "worker" and a consideration of terms of the contract in that context by general policy considerations as to the nature of employment and self-employment. The reasoning of the tribunal in Roberts, with its long citation from Byrne Brothers, appears to come close to saying that, because the applicants ought to come within definition of worker, it follows that they do. The Regulations leave parties free to enter contracts and, whether or not the contract includes an obligation to do the work personally, is a matter of construction. The Tribunal in Wright appears to have regarded the "subordinate and dependent position… similar to that of an employee" of the applicants as justifying a conclusion that they came within the definition. Moreover, it does not necessarily follow from the fact that the work was done personally that there was a contractual obligation to do it personally.

23… Mr Recorder Underhill rightly stated at paragraph 17(6) that the tribunal is concerned with the rights and obligations of the parties under the contract."

72. The Court of Appeal upheld the decision that it was intended the Claimant should carry out the works personally.
73. The question arose again in James v Redcats (Brands) Ltd [2007] ICR (Elias J). The case concerned a Claimant who worked as a self-employed courier, was able to provide her own vehicle and worked as she wished. The Employment Tribunal found that she was a "worker". The relevant substitution clause was as follows:

"You need to ensure that a suitable alternative courier is available to carry out the terms of this agreement when you are unable. This might happen during holidays or if you are ill. You can have more than one alternative. You will need to discuss and agree the identity of your replacements with your courier link contract."

74. At paragraph 27, Elias LJ considered the Judgment of Pill LJ in Redrow which we have cited:

"Similarly, both parties accept that the question whether there is an obligation to do work personally is a matter of construction of the contract: see the observations of Pill LJ in the case of Redrow v Wright [2004] 3 All ER 98 at para 21. The fact that the individual chooses personally to supply the services is irrelevant; the issue is whether he is contractually obliged to do so."

75. Elias J went on to consider the question of whether the terms of the contract relating to the provision of the substitute negative suggestion that the Claimant was contractually obliged to perform the services personally; he continued at paragraph 34:

"The critical feature here is that the substitute is to be provided when the individual is unable to provide work. That is narrower than the phrase "unable or unwilling" which was the term used in the Tanton case, as the EAT recognised in the MacFarlane case. If I need not perform the work when I am unwilling, then there is never any obligation of any kind to perform it. It is entirely my will and therefore my choice. But if I can only be relieved of the duty when I am unable, then I must do the work personally if I am able."

76. The authorities were also considered by HHJ Peter Clark in MPG Contracts v England [2009] UKEAT/0488/08. The Claimants were self-employed partitioning and ceiling erectors and the question arose whether they were "workers". The contract provided the Claimants should be regarded as self-employed and the substitution clause (5) was as follows:

"The Subcontractor is free to subcontract the work or to engage or employ at the Subcontractor's own cost whatever suitably trained Representatives that may be necessary to fulfil an engagement, provided that the Contractor is provided with sufficient information to satisfy itself that the Representatives have suitable skills and experience to do the work. The Subcontractor shall remain liable to the Contractor for any work performed by any of the Representatives."

In the circumstances, the Claimants were not workers. This was another example of a case where an unfettered right to delegate was inconsistent with a provision of personal services.

77. We would draw the following principles from the authorities to which we have referred, (a), the question whether or not a contract provides for the performance of personal services is essentially a matter of construction, (b), the court is concerned with construing the contract, rather than with general policy considerations, (c), the fact that the individual chooses personally to supply the services is irrelevant; the issue is whether he is contractually obliged to do so, (d), the right or obligation to employ a substitute will not necessarily mean that there is no obligation on the part of the "contractor" to perform personal services unless that right to employ a substitute is unfettered, (e), in cases where the "contractor" is unable as opposed to unwilling, to carry out specified services, and has accepted an obligation to perform those services, but is unable to do so, and where he himself does not bear the costs of employing a substitute, a limited or occasional power of delegation may not be inconsistent with a contract to provide personal services, (f), a worker holds an intermediate position between an employee and someone who carries on his own business undertaking.
78. The cases to which we have referred where the contract has been construed so as not to provide for the provision of personal services are all cases of a right to substitute arising in wider circumstances than simple inability to carry out the work and where the "employer" has a significant say in the selection of the substitute.

Business Undertaking

79. The question whether the "worker" carries on a business undertaking of which the "employer" is a client or customer is, of course, closely linked to the issue of whether the "worker" provides services personally. We are greatly assisted by the analysis of Elias J in James v Redcats (Brands) Ltd [2007] ICR 1006. Elias J drew attention to the dichotomy of common law between a person being in employment and being in business on his own account. At common law, if someone was not an employee it mattered little what he was. The position is, however, quite different when considering the statutory concept of the "worker". He said at paragraph 44:

"44. Plainly if the dichotomy were always that simple, all those who are found not to be employees under a contract of employment will perforce be in business on their own account. If that were so, then limb (b) would have nothing to bite on. The exception for those contracting as a business undertaking would swallow everyone potentially falling within the clause. That obviously cannot be right.

45. Accordingly, the requirement to distinguish between employees, workers, and those engaged in a business undertaking of their own demands a more sophisticated analysis than some of the earlier cases have provided. It follows that Tribunals analysing whether someone is a worker or operating his business must be very careful when considering the decisions which have looked at the question whether a person is an employee, because of the loose way in which all non-employees are often described as being in business on their own account.

46. To put it another way, not all those who might properly be described as self employed are engaged in a business undertaking. As Mr Recorder Underhill QC (as he then was) noted in Byrne Brothers (Formwork) Ltd v Baird & Ors [2002] IRLR 96, para 17:

"The intention behind the regulation is plainly to create an intermediate class of protected worker, who is on the one hand not an employee but on the other hand cannot in some narrower sense be regarded as carrying on a business….it is sometimes said that the effect of the exception is that the regulations do not extend to the "genuinely self-employed"; but that is not a particularly helpful formulation since it is unclear how "genuinely" self-employment is to be defined."

80. Elias J continued at paragraph 48:

"48. I accept that in a general sense the degree of dependence is in large part what one is seeking to identify - if employees are integrated into the business, workers may be described as semi detached and those conducting a business undertaking as detached – but that must be assessed by a careful analysis of the contract itself. The fact that the individual may be in a subordinate position, both economically and substantively, is of itself of little assistance in defining the relevant boundary because a small business operation may be as economically dependent on the other contracting party, as is the self employed worker, particularly if it is a key or the only customer.

49. What the Courts must essentially try to do here, it seems to me, is to whether the essence of the relationship is that of a worker or somebody who is employed, albeit in a small way, in a business undertaking. In Cotswolds Developments Construction Ltd v Williams [2006] IRLR 281, para 53, Langstaff J suggested that the focus is upon "whether the purported worker actively markets his services as an independent person to the world in general…..or whether he is recruited by the principal to work for that principal as an integral part of the principal's operations."

50. I would agree that this will often assist in providing the answer, but the difficult cases are where, as in this case, the putative worker does not in fact market his services at all, nor act for any other customer even although Mrs James is not barred by her contract from so doing. In some cases the business is effectively created by the contract."

81. We repeat what Elias J said at paragraph 59 in respect of the dominant purpose test:

"The dominant purpose test is really an attempt to identify the essential nature of the contract. Is it in essence to be located in the field of dependent work relationships, or is it in essence a contract between two independent business undertakings? The test does not assist in determining whether a contract is a contract of service or of services; it does not, in other words, help in discriminating between cases falling within limbs (a) and (b) of the definition of worker. Its purpose is to distinguish between the concept of worker and the independent contractor who is in business on his own account, even if only in a small way."

82. He continued at paragraph 64:

"64. The existence of the exception for those in business on their own account demands that the courts must differentiate between workers and those in business, and that inevitably requires consideration of whether the contract, properly analysed, is predominantly of the former or the latter kind. So a similar test to identify the dominant characteristic of the contract applies.

65. I would add that the description of the test as one of identifying the dominant purpose is perhaps not an altogether happy one. As Maurice Kay LJ observed in Mingeley, "it has its difficulties because the search for the dominant purpose can be elusive and does not always result in clear and incontrovertible conclusions." (para 15).

66. The problem, I suspect, lies in the word "purpose" which can mean both immediate and longer term objectives. If I employ bus drivers who are employees, it may still be said that my purpose is to run an efficient bus service rather than personally to employ the drivers. By "dominant purpose" in this context the courts are focusing on the immediate purpose of the contract.

67. An alternative way of putting it may be to say that the courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not. If it is, then the contract lies in the employment field; if it is not - if, for example, the dominant feature of the contract is a particular outcome or objective and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field.

68. This is not to suggest that a Tribunal will be in error in failing specifically to apply the "dominant purpose" or indeed any other test. The appropriate classification will in every case depend upon a careful analysis of all the elements of the relationship, as Mr Recorder Underhill pointed out in Byrne. It is a fact sensitive issue, and there is no shortcut to a considered assessment of all relevant factors. However, in some cases the application of the "dominant purpose" test may help tribunals to decide which side of the boundary a particular case lies.

The statutory provision relating to burden of proof found in s.28 of the National Minimum Wages Act must have some significance in the judicial balancing exercise when the definition in that Act is under consideration. It seems to me that the effect of the presumption is that when balancing the various features of the relationship, it is necessary to ask not whether the features of the contract are consistent with somebody working in business on his own account, but rather whether they are consistent with, or at least not inconsistent with, the performance of services by somebody who is self-employed but who does not conduct his or her own business.

69. Of course, not all features will necessarily be consistent or not inconsistent with that status. That will not of itself preclude finding that the person concerned is a worker. It will all depend on balancing all the relevant features, having regard to the burden of proof, and making a judgment overall as to where the predominant purpose lies."

Conclusions

General Considerations

83. We note the following matters are among those relevant to the construction of the contract; the contract was drafted by the Respondent. In this and similar contracts there is unlikely to be a parity of bargaining power between the parties and there will be a significant balance in favour of the Respondent. The contract is clearly designed to ensure, as far as possible, that the Respondent is not burdened (as the Respondent might see it) with the obligations of an employer under a contract of employment or with the rights applicable to a "worker". It was highly unlikely that there would be any real negotiation as to the terms and the contract was probably offered on a take it or leave it basis.
84. In relation to the issue of the "dominant purpose" we are unable to accept that Elias J was wrong. Apart from the fact that Elias J (now Elias LJ) has a mastery of the subject, his view was based on the analogous authorities of Mirror Newspapers Ltd v Gunning [1986] 1WLR 546, approved by the House of Lords in Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and more recently by the Court of Appeal in Legal Services Commission v Patterson [2003] EWCA Civ 1558 and Mingeley v Pennock & Ivory t/a Amber Cars [2004] IRLR 373.
85. As was made clear in Redrow Homes, all relevant features must be taken into account in determining the question of whether a question provides for the Claimant to be a worker or on business on his own account. As was said at paragraph 73:

"Will all depend on balancing all the relevant 'features, having regard to the burden of proof, and making a judgment overall as to where the predominant purpose lies."

86. We now turn to the right to provide a substitute and the definition of "worker"; we have already set out the relevant principles. Insofar as concerns the present case it is clear that there was no unfettered right to provide a substitute. The right to provide a substitute was limited to circumstances when, (a), the Claimant had already agreed to undertake work the night before, (b), he was "unable" as opposed to "unwilling" to perform the work, (c), there was no unfettered right to delegate or appoint a substitute, (d), the substitute had to be one of the Respondent's existing sales force, (e), the circumstances of leads only being provided the night before the relevant appointment meant that once accepted the parties clearly expected that any subsequent decision not to take up the lead related to some anticipated "inability".
87. The matters we have just set out are sufficient to distinguish this case from cases we have referred to earlier when there was a more general and unfettered right to delegate. We reject the submission that the term "unable" comprehends unwillingness. If, for example, the Claimant had taken a last minute decision to take his family to the seaside so that he was "unable" to perform the work he had agreed to do, that does not amount to inability within the meaning of this contract. We reject the submission that the "salesman" referred to in Clause 2:9 could be any salesman as opposed to a member of the Respondent's sales force. We also reject the submission that no prior approval was required because, as Mr Singh pointed out during the course of submissions, all members of the sales force had in effect been pre-approved and only they could be used as substitutes.

Notice of Appeal 6:2 and submission that the Employment Tribunal at 2:17 was in error in holding that the Claimant was required to confine his activities to the Respondent

88. In our view the Employment Tribunal was entirely correct because in substance this is what the Claimant was required to do. If one asks the question forensically: what else could he do? His expertise and experience over a number of years was in the double glazing industry. He was a double glazing salesman. The fact that it was theoretically possible for him to undertake some totally different work does not mean he was in business on his own account.
89. We, of course, accept the fact that the Claimant actually did the work personally does not necessarily mean that he was contractually required to do the work personally. The Employment Tribunal, however, was entitled to look at the reality and the fact that the most limited power to delegate which we have described, did not of itself destroy the possibility of their being an employer/employee relationship, let alone the looser concept of the Claimant being a "worker". It has long been recognised that a limited or occasional power of delegation is not necessarily inconsistent with a contract of service; we refer to the authorities we have cited earlier.
90. There was no evidence that the Claimant or any of his fellow salesmen ever worked for anyone else and, as Mr White pointed out, the contract terms in effect precluded this. It will be recalled that 48 hours' notice of inability had to be given. We again draw attention to the fact that the leads came in the evening before the appointments. The Respondent would telephone these to the Claimant and other salesmen as the Employment Tribunal found. It should be borne in mind that Clause 6:1 of the contract contained the specific undertaking that the salesmen would not work for any other company providing similar goods or services as the company, not only for the duration of the agreement but also for the period of three calendar months thereafter.
91. The Employment Tribunal, therefore, was justified in its first Judgment finding that the terms of the 2005 agreement were firmly in the Respondent's favour and highly exclusive and made it extremely difficult for a salesman to pursue any other occupation. The reality of the matter was, as the Employment Tribunal correctly found at page 5 of its first Judgment and paragraphs 16 and 17 of the second Judgment, that the Claimant was required to confine himself to providing services to the Respondent and that he did so.
92. We regard the suggestion that the Claimant could have worked as a salesman for other products as unrealistic, having regard of the requirements placed upon him to which we have referred.

The suggestion that the Employment Tribunal failed to consider relevant matters on the question of whether or not the Claimant was carrying on a business undertaking

93. This, of course, is linked to the issue of personal services. The Employment Tribunal had clearly taken into account all relevant facts and was entitled, in our opinion, to hold, looking at the contract as a whole, that the Claimant was a "worker" rather than carrying on his own business. Even if (and the evidence is in dispute) he paid sums to friends as a "thank you" and some small commissions in respect of leads introduced to him which resulted in work done for the Respondent, the Employment Tribunal was entitled to conclude, as it did, at paragraph 16 of the second Judgment that the annotation of commissions within the Claimant's accounts did not provide any reliable indication of whether in fact he was undertaking work for other persons or, indeed whether he was permitted to do so by the Respondent.
94. Further, the Employment Tribunal did not ignore the fact that the Claimant paid VAT and was treated as self-employed. It is a common feature of cases where there is a dispute as to whether or not a Claimant is employed or a worker, for him to be treated by the "employer" as self-employed. The Employment Tribunal looked at the contract as a whole holistically and overall. The first Judgment clearly acknowledged the fact that the Claimant paid VAT and was treated as self-employed. The Employment Judge correctly noted that the views of HMRC were not conclusive (see page 5 of the first Judgment).
95. The Employment Tribunal directed itself as to the hybrid nature of the contract and the bias of terms in favour of the Respondent. Further, it correctly directed itself that the labels placed on the agreement by the parties were not determinative. The Employment Tribunal correctly directed itself as to the role of the Employment Tribunal to ascertain the essence of the contract in accordance with the Judgment of Elias J in Redcats; see paragraph 13 of the second decision.

Was the Judgment Meek Compliant?

96. We are satisfied there is nothing in this point. We would refer to what Lord Phillips said at paragraph 19 in English v Emery Reimbold and Strick [2003] IRLR 710:

"It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the Judge reached his decision. This does not mean that every factor which weighed with the Judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the Judge's conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the Judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, in may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon."

97. The reasons given by the Employment Tribunal in both the first and second Judgment make it quite clear why the Claimant won and the Respondent lost on the issue of whether the Claimant was a "worker" and made adequate finding to support that conclusion. There has been no failure to comply with rule 30(6) of the Employment Tribunal's Rules of Procedure.

Disposal

98. In the circumstances and for the reasons we have given, this appeal must be dismissed.
99. In the light of the most modest sum now at stake we remind the parties of the advantages of compromising the dispute through the mediation of ACAS which is available through the Employment Tribunal.
100. We would conclude this Judgment by expressing our gratitude to counsel for their helpful oral and written submissions.