DECISION

A Introduction

1 The Appellant Company (“WWUK”) runs a major business providing help to those who wish to lose weight. It does so in several ways under the brand name Weight Watchers (“WW”). As part of this, WWUK provides the umbrella organisation for a large series of WW weekly meetings throughout Britain. The weekly WW meetings are hosted by individuals known as Leaders. WWUK is a wholly-owned subsidiary company of Weight Watchers International Inc. The parent company is also parent to companies running similar businesses elsewhere in the world, and to an internet business. Save for the fact that the international company has control of WWUK, the tribunal saw no relevance either in the internet business or the foreign businesses to these appeals.

2 The tribunal adopts the following terminology and abbreviations in this decision:

ASM Area service manager. The country is divided by WW into a number of regions, and each region into a number of areas, for the purposes of managing the WW business. An ASM is the employee charged with managing the business in her area. She answers to her RSM.

Helper An individual who assists at a weekly WW meeting, for example by weighing and recording members’ weights or taking or checking or recording their membership payments.

Leader An individual who has primary responsibility for running a WW meeting. Her relationship with WW is the main issue in these appeals. Leaders were previously known as lecturers. A Leader may be responsible for a single weekly meeting or up to 12 weekly meetings. The average is between three and four.

Main Appellant WW. The phrase is used to distinguish between WW as an appellant and the Leaders who are also appellants.

Meeting The weekly sessions held for members and run by Leaders. These normally last for an hour and consist of a combination of the following: payment for attendance or production of a card showing prepayment by each member; confidential weighing and recording the weight of each member; a session led by the Leader for presentation or discussion of information or other matters relevant to weight loss by those at the meeting; sales and purchases of WW food and other products. Although “meeting” is the term used in this decision, the term “class” is used interchangeably with “meeting” in the contractual documents.

Member Paying attendees at a WW meeting or others entitled to attend the meeting. Members may pay to attend either weekly or by a monthly pass. “Gold members” are members who have achieved their target weight (the weight each member sets herself as a target while attending the meetings) and are entitled to continue attending without continuing payment.

RSM Regional service manager – see ASM.

WWUK Weight Watchers (UK) Ltd, the Main Appellant. It is a private company limited by shares and registered in England and Wales. It is wholly owned by Weight Watchers International Inc.

This use of language is standardised within WW. For example, Leaders used to be called lecturers, helpers used to be called weighers and checkers, and meetings used to be called classes. Decisions were taken to change these names to those set out above in or about 2003, and the new terminology replaced the former terminology in most contexts. The tribunal uses the current terminology unless there is reason to note the use of the former terminology. The tribunal does not regard the change in terminology as signifying any specific underlying change, and regards the old and new terms as interchangeable.

3 The tribunal refers to individuals who are Leaders or in any of the other categories above as “she”. This reflects the evidence. For the purposes of this decision the feminine where used includes the masculine where appropriate.

4 The central question in these appeals is whether those Leaders are employees of WWUK or are self-employed.

The context of the appeals

5 The question is of considerable practical importance. At any one time there are more than 1,000 Leaders holding weekly WW meetings in Britain, between them conducting several thousand meetings each week. Those meetings involve many thousands of individual members in any week.

6 It is convenient to summarise the general factual position before dealing with the evidence in detail. WWUK is part of a long-established major international corporate business providing weight reduction and weight maintenance help to its customers, whom it calls members. This help is currently provided through two primary routes: through local meetings and by the internet. WWUK is involved in running meetings locally throughout Britain. In any one week there may be over 6,000 separate meetings taking place. The meetings are arranged in locally convenient venues and are normally arranged as a pattern of weekly meetings occurring at the same time and place throughout a year. There are typically 50 weekly meetings in any one successful annual series of meetings. Members tend to join after the summer holidays. However, a member may join at any time. Most members are female, and that is assumed in this description, but it is open to both sexes. There are, however, age and health limits. WWUK will not accept some individuals as members, and may request medical information before considering an application from someone to become a member. WWUK seeks to ensure that only those who are healthy and who can benefit from its services become members, and therefore controls those who may join with this in mind.

7 A meeting is branded and advertised as a WW meeting. A typical meeting will take place in a location such as a village hall or a local church room rented for the occasion. WW does not have purpose-built or dedicated accommodation. A meeting will normally be advertised locally and will be programmed for a maximum of an hour. A member pays a fee to attend. She will often do this in cash at the start of the meeting. She will also have her weight taken formally and confidentially on a specially calibrated set of scales and recorded on a formal record of her weight. Calibration of the scales is checked carefully on a regular basis, and reliability of the weight recorded is therefore high. A meeting is run by an individual called a Leader. However, particularly in better attended meetings, she may delegate the duties of weighing and recording and of collecting fees to others. They are known as helpers.

8 A typical meeting has two other aspects of interest to the members attending. There is a plenary session of the meeting for those who wish to stay after being weighed. This is a session led by the Leader that may be a presentation, lecture, demonstration, discussion, seminar, or a combination of any of those and similar group communication methods. Separately, the Leader and helpers usually provide items related to weight loss for sale or free. The free items normally include leaflets and other specialist literature produced by WWUK. The other items are merchandise for sale to members. The merchandise is exclusively WWUK produce, for sale at terms set by WWUK. A member will therefore typically join a particular meeting, perhaps at 10.00am on Tuesdays or 7.00pm on Thursdays.

9 As part of this, each member is encouraged to set a target weight (or goal weight) and to lose weight so as to reach that target, and then to maintain her new weight. WWUK’s systems are designed to assist members in achieving and maintaining their target weights. A member who does this may become a Gold member, and is given certain benefits, including recognition of her achievement. It was clear from evidence before the tribunal that Leaders and ASMs are regularly recruited from those who are Gold members, and so are successful in reducing weight and maintaining that reduced weight.

10 It is an essential part of the WWUK organisation of meetings that each meeting has a Leader and that she is the link between WWUK and the members at that meeting. WWUK provide Leaders with detailed plans for all meetings, including a weekly topic or topics, and weekly leaflets for provision to all members. Outside the immediate context of a meeting, WWUK protects the intellectual property in its products and services closely and does not allow anyone else to use or derive value from them.

11 WWUK, in common with its affiliates throughout the world, has a central national organisation supplemented by regional and area staff. The main team of staff are comprised of regional service managers (RSMs) for each of the regions into which Britain has been divided for these purposes. Below each RSM is a team of area service managers (ASMs). Each ASM has direct links with her own local group of Leaders. A Leader, as noted, is assisted by helpers, but they have no direct links with ASMs or with WWUK more generally. The Leader normally liaises only with her ASM. A member normally only deals with the Leader of the series of meetings she attends. However, there is a central national staff to deal, for instance, with the supply of merchandise or with any issues arising from members about faulty merchandise.

12 The tribunal understands that it is also possible for someone to become a subscriber of WWUK direct through the website alone. However, that is not the concern of the tribunal in this appeal. Most members attend meetings in person, and do so for many weeks.

The decisions under appeal

13 The decisions require determination of the status of Leaders acting in Scotland as well as England and Wales. No point was taken on this by either party, and the tribunal assumes that the relevant laws apply equally throughout Britain. In saying this, the tribunal is conscious that basic issues of contract and tortuous liability that were discussed in the hearing do not necessarily have the same form or terminology in Scotland as south of the border.

14 The question of the status of a Leader arises for decision by this tribunal because of two series of decisions issued by the Commissioners of Inland Revenue (now Her Majesty’s Revenue and Customs). We refer to both as “HMRC” in this decision. Both series of decisions assume that the Leaders were employees. WW and several Leaders have appealed against these decisions, contending that Leaders are self-employed.

15 The first series of decisions were determinations made under regulation 80 of the Income Tax (Pay as You Earn) Regulations 2003 (the PAYE Regulations). These were issued for the years 2001-02 to 2006-07. The determinations apply only to WW as the person that HMRC considered to be the employer of the Leaders. WW appealed against all the determinations. Those appeals are referred to as the Regulation 80 appeals. The tribunal must examine those determinations in some details before turning to the substantive issue as the validity of the determinations for 2001-02 and 2002-03 were challenged.

16 The second series of decisions were decisions made under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999 (“Section 8”). Those decisions were formal decisions naming individuals and requiring the named individual and WW to account for Class 1 NI contributions for those individuals for the same tax years as the Regulation 80 decisions. Current legislation imposes considerable practical problems both for HMRC and for tribunals in handling NI contribution decisions and appeals against those decisions in situations like this. There must be a separate appealable decision for each individual who is contended to be an employee for each year in which that contention is made. Further, both the alleged employer and the individual have rights of appeal against that decision. The tribunal must also deal with these issues before turning to the substantive issue.

The status of “worker”

17 There is a further issue of status behind the categories of employee and self-employed person that surfaced in the evidence and in the wording of the decisions under appeal. This is the status of someone who is economically active as a “worker”. It is a status given by European law to employees and some self-employed. It follows from HMRC’s view that Leaders were employees in the period in question that they were also workers. WW contended to the tribunal that the Leaders were neither employees nor workers, although its literature appeared to take another view as detailed below.

18 The tribunal is guided in its understanding of the term “worker” by the most helpful judgment of Smith LJ in the recent decision of the Court of Appeal in Autoclenz Ltd v Belcher and others [2009] EWCA Civ 1046, handed down during the hearing of these appeals. In Autoclenz, the Court of Appeal was concerned with the status of a number of individuals said to be self-employed with regard to holiday pay entitlement. The individuals were entitled to holiday pay if they were either employees or “limb (b) workers”. Both questions were in issue before the Court of Appeal. The tribunal is of course bound by the decision of the Court of Appeal considering the nature of employment and self-employment in that decision. In addition, it accepts the description and discussion of “limb (b) workers” from that decision.

19 The reference to a “limb (b) worker” is to section 230(3) of the Employment Rights Act 1996. This provides:

“In this Act “worker” … means an individual who has entered into or works 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.”

20 Mr Tolley made a number of points about the provision of holiday pay for Leaders, and the tribunal heard evidence about such payments. For example, he drew attention to a statement issued to all Leaders in WW’s Self-employment and income tax booklet. This sets out WW’s position that Leaders are self-employed and draws attention to the position of the self-employed with regard to income tax and National Insurance contributions. It also states that Leaders do not receive any company benefits from WW. But it then states:

“This does not affect your entitlement to receive holiday pay as this is something that all workers are entitled to.”

21 Mr Tolley questioned the witnesses about the receipt of holiday pay, and the evidence showed that it was being received though there was generally no clear view about why. Nonetheless, Mr Tolley submitted that the “entitlement to receiving holiday pay” must be a reference to the Working Time Directive.

22 The tribunal notes this, and the argument that the Working Time Directive applies only to those who are required by their contracts of service or for services to provide personal service under the contracts. It also notes Mr Peacock QC’s submission that WW have not accepted that there is an entitlement under the regulations to holiday pay. It considers that it should not take this argument further. HMRC has no power to determine whether an individual is in this sense a “worker”, and the tribunal need determine it only if it is necessary to do so as part of its decision. Ordinarily, if it arises as a dispute, it is for employment tribunals to decide the matter. The tribunal was not asked formally to determine the matter, and it does not consider it a necessary part of its decision. This decision is therefore not to be taken as expressing any concluded view on the issue. The tribunal takes the points about holiday pay into account in the context of deciding if the individuals are employees. And in that context it considers the booklet as part of the documentary context of the decision it must reach.

23 The tribunal observes, however, that it is perhaps unfortunate that HMRC chose to use the term “worker” in its determinations. It would in the tribunal’s view be better practice if use of the term were avoided in similar future decisions unless the use is deliberate and it is clear that this tribunal is asked to deal with the matter.

Decisions in principle

24 The tribunal approached these appeals as appeals on the issue of principle only. It did not consider, and was not offered evidence on which it could consider, whether any of the determinations or decisions, if correct in law, was issued for an appropriate amount. The tribunal took the view that it would, if necessary, decide any issue of quantum after deciding the issues of principle in respect of each decision before it on application of the parties.

The period in question

25 The period in question in these appeals is the total period of the tax years covered by the valid assessments. That is the period from April 2001 to April 2007.

26 The tribunal received evidence dealing both with the status of a Leader before that period and after that period. It took care not to put any weight on evidence about the status of a Leader that either predated or postdated the years under review unless it was clear that the position remained unchanged between the date of the evidence and the period in question. Notwithstanding any such evidence, this decision is not to be taken as deciding any question in any other tax year than those covered by the specific valid decisions under appeal.

B Preliminary issues

The validity of the PAYE decisions

27 Mr Peacock QC raised two formal objections to the validity of some of the Regulation 80 determinations against WW. A series of determinations was issued by HMRC on 27 July 2007. They applied to each of the tax years from 2001-02 to 2006-07. After correspondence between the parties, a second series of determinations was issued by HMRC. It was accepted by HMRC that it was then too late to issue a new determination for 2001-02 so the new determinations were issued for the years from 2002-03 only. Mr Peacock QC contended that the determination for 2001-02 was not within the decision making powers of the regulation, and that the determinations for both 2001-02 and 2002-03 were out of time.

The original Regulation 80 determinations

28 The original series of determinations were issued by HMRC on the relevant standard form. The only specific details added to that standard form were the descriptions of the persons contended to be employees and the sum assessed (a round sum of earnings in excess of £10 million for each year). The tribunal is not concerned with the sums stated in this appeal. Its concern is solely whether the descriptions given are adequate. It notes, however, that the way in which the amounts are stated on the standard forms is such that in the case of these determinations no help is given to the task of clarifying the scope of the statement of those within the decision by reference to that sum.

29 This is important because a Regulation 80 notice can be aimed at either or both of two groups of individuals: those who have been identified in PAYE returns by the employer where HMRC contends that the sums returned for those employees are too low, and those who have not been identified in the returns but who, in the best judgment of HMRC, should have been identified as employees.

30 The only description given by HMRC in its original series of determinations to identify the individuals to whom the decisions applied was:

“Workers engaged as Leaders and other employed earners”.

After correspondence, the decisions for all but the first year were reissued with the description:

“Workers engaged as Leaders”

31 Regulation 80(4) empowers HMRC to make determinations that:

“may

(a) cover the tax payable by the employer under regulation 68 for any one or more tax periods in a tax year, and

(b) extend to the whole of that tax, or to such part of it as is payable in respect of –

(i) a class or classes of employees specified in the notice of determination (without naming the individual employees), or

(ii) one or more named employees specified in the notice.”

32 Mr Peacock QC submitted that the wording used by HMRC in its first series of determinations identified a category that was too broad to comply with Regulation 80(4). Therefore the determinations were invalid. He did not take that point with regard to the second series of determinations. Mr Tolley accepted that the wording “and other employed earners” was irrelevant and wrong. That was why HMRC had reissued the determinations that it could properly reissue within the time limits. In his view the wording had been quite clear in the context of the correspondence. He also submitted that the faulty wording could be severed from the valid wording so not invalidating the notice of determination. Section 114 of the Taxes Management Act 1980 supported that approach.

33 The tribunal takes the view that a notice of determination must be adjudged as valid or otherwise on its face. It is not appropriate to explore whether or not there has been correspondence, and if so what correspondence, between HMRC and the employer concerned. The notice must therefore have wording that makes clear either the category or categories as required by subparagraph (a) or it must name the individuals as required by subparagraph (b). In this case the original determinations identified two categories, not one.

34 There was no problem with the category of “workers engaged as Leaders”. In the case of any individual it was clear whether the individual was in that category or not. In so interpreting the phrase, the tribunal assumes that the word “worker” does not have a technical meaning but is intended (possibly unwisely) as a common English word. Mr Tolley was right to concede that “other employed earners” was not a valid category. It is far too general. In the context of this case, for example, it could have referred to the helpers who assist the Leaders. It could equally have referred to those employees declared by the employer, for example the ASMs. Where, as in this case, the notice of determination raises a determination for a considerable amount of money, vague wording such as this has the effect of requiring the employer to justify every part of the PAYE return without being made aware of the reason for the Regulation 80 determination. WW’s advisers were right to object to that wording.

35 Section 114 of the Taxes Management Act 1980 (“TMA”) re-enacts a longstanding rule of tax law about want of form or errors not to invalidate assessments, etc. It provides, as relevant here:

“An assessment or determination warrant or other proceedings which purports to be made in pursuance of any provision of the Taxes Acts shall not be quashed, or deemed to be void or voidable, for want of form, or be affected by reason of a mistake, defect or omission therein, if the same is in substance and effect in conformity with and according to the intent and meaning of the Taxes Acts, and if the person or property charged or intended to be charged or affected thereby is designated therein according to common intent and understanding.”

The tribunal agrees with Mr Tolley that this protects the validity of the notices of determination once the phrase “and other employed earners” is accepted to have no effect. Without those words, the determinations are within the Regulation, as any doubts about their scope are removed. They were issued on the appropriate standard forms. The tribunal accepts them as valid with the second class of earners removed.

36 Mr Peacock QC also submitted that both the 2001-02 and the 2002-03 determinations were out of time even after the reissue of the 2002-03 notice. Regulation 80 does not itself contain any express time limit. Instead, the relevant formalities are dealt with by the general provision in Regulation 80(5):

“A determination under this regulation is subject to Parts 4, 5 (other than section 55) and 6 of TMA (assessment, appeals, collection and recovery) as if –

(a) the determination were an assessment, and

(b) the amount of tax determined were income tax charged on the employer,

and those Parts of that Act apply accordingly with any necessary

modifications.”

37 Parts 4, 5 and 6 of TMA consist of sections 28A to 70A of the Act. Only Part 4 is relevant here. In that Part, sections 28A to 30B deal with assessments. Time limits are dealt with in sections 34 to 40. Mr Peacock QC contended that the determinations could be treated as assessments within Part 4 only by reference to section 29 (assessment where loss of tax discovered). There was no other provision in that Part under which the determination could be treated as made. Section 29 contains its own conditions. Section 29(3) prevents an assessment being made under the discovery power in section 29(1) unless one of the conditions in subsections (4) or (5) is met. Subsection (4) concerns fraudulent or negligent conduct, which was not alleged here. Subsection (5) is the more general power relating to assessments made after the closure of an enquiry when the officer concerned could not reasonably have been expected to make the assessment while the enquiry was open.

38 Mr Tolley expressed puzzlement that if this was the Appellant’s argument then it would have applied to all the determinations and, he considered, should have been the first argument in the appeal. In his view it was plainly wrong. The time limits were those in section 34, the ordinary time limits applying to any assessment to income tax. Regulation 80(5) required the necessary modifications to be made to the terms of TMA to apply them to a Regulation 80 determination. They did not require that the Regulation 80 determination was to be treated as made under some other assessing power and then be read subject to the specific conditions of that other assessing power.

39 The tribunal accepts Mr Tolley’s argument on this point. Section 34(1) of TMA provides as relevant:

“an assessment to income tax or capital gains tax may be made at any time not later than five years after the 31^st January next following the year of assessment to which it relates.”

The tribunal accepts that the necessary modification of this provision required by Regulation 80(5) is that it should be read as including any determination under that Regulation in the same way as if it were an assessment. In other words, Regulation 80 is itself in this sense the assessing power. There is no requirement that the power be treated as being within some other assessing power for that result to be achieved. Section 29, by contrast, is a specific power to deal with discovered problems with self-assessment returns. If that was the appropriate assessment power for this case, then Regulation 80 would not be needed. It finds that the determinations for 2002-03 to 2006-07 are within that time limit, so none of the determinations are out of time.

40 The tribunal concludes that all the determinations before it are valid and that it is concerned with a period in question covering the tax years 2001-02 to 2006-07.

Identifying the appellants against the NI contribution decisions

41 The appeals were originally listed for hearing as including 10 sets of decisions made under Section 8 naming individuals. 8 of the 10 individuals were named as witnesses for WW in the appeals. The individuals had given notice to appeal. The tribunal was therefore concerned to ensure that each of those individuals was notified properly that she was also an appellant in the appeals and was entitled to take such part as she wished in the appeals either through WW, (“the main Appellant”) or directly.

42 This poses a practical problem common to all such series of decisions. If an individual is an employee for income tax, and therefore PAYE, purposes, then that individual is also an employee for NI contribution purposes. So on any occasion on which HMRC decides on the best of judgment that it should issue a Regulation 80 decision referring to an identified category of employees then it is also fully entitled to issue Section 8 decisions to the contended employer and each individual in the identified category. As the underlying law is the same and HMRC makes both sets of decisions, it must follow that the essential question of law in any appeal is the same whether the appellant is the contended employer or the named individual. But it does not follow that the contended employer and the named individual take common cause in the appeal. It may be that HMRC’s decision arises from, or causes, a dispute between the contended employer and the individual so that the two parties take opposite views of the proper outcome of the appeal. It is therefore essential, if the tribunal is to deal properly and fairly with such appeals, that the individuals named in the Section 8 decisions, or at least some of them, are parties to any hearing such as this. The tribunal must also take care, when considering the evidence, to note any views of individuals who are directly affected by any Section 8 decision.

43 As this tribunal discussed in its decision in PA Holding and Janjuah v HMRC [2009] UKFTT 95 (TC), this is because a decision under Section 8 affects not only an individual’s liability to pay contributions. That decision, once made and confirmed, also affects that individual’s rights to both short-term and long-term benefits in the future. That applies in ways that are not always obvious for those with lower earnings. For example, a Leader who is self-employed is liable to pay Class 2 contributions for all weeks in which she is ordinarily self-employed. But she can choose to be excepted from liability if her annual earnings are below a set level. That is her decision and she may, if she wishes, choose not to be excepted, in which case she remains liable to pay. Those payments go towards her state pension entitlement. An employee who earns less than the equivalent amount, the lower weekly earnings limit for Class 1 NI contributions not only does not pay contributions but cannot do so. She cannot establish a contribution record towards her state retirement pension. So a Section 8 decision that results in identifying someone as self-employed has the implied effect of identifying a liability to pay Class 2 contributions for any individual who had not applied for exception from that liability and also identifying an opportunity for that person to pay for a contribution record that could result in long-term benefits regardless of earnings level.

44 After discussion with HMRC and the main Appellant, and having examined relevant correspondence, the tribunal was satisfied that each of the 8 individuals was an appellant in the appeals concerning her own position (but not the Regulation 80 appeals). The tribunal explained this position to each of the 8 individuals as she gave oral evidence. It invited each of the individuals to state her own position and gave each of them a specific opportunity at the close of her evidence to add anything she wished to add to the evidence she had already given. Some took that opportunity to add comments, and those are taken into account by the tribunal.

45 The tribunal is therefore satisfied that in respect of those 8 individuals they took as full a part in the hearing as they wished not only as witnesses for WW but in their own right as appellants. It put weight on their evidence accordingly.

46 Two other Leaders specifically appealed against notices naming them, but did not take part in the hearings of the appeals. The tribunal therefore directed that their appeals be stood over to be considered after the tribunal had decided the appeals involving the individuals who did attend.

C The main issue

The evidence

47 WW presented the tribunal with full documentary evidence about its relationship with Leaders. Oral evidence was given by Melanie Stubbing, President International of WWUK’s parent company. She was during the relevant period vice president then senior vice president of operations for WW in the United Kingdom. The tribunal accepts her evidence as given on behalf of WW. At the request of the tribunal, further evidence was given by two employees of WW. Mel Pym was previously a Leader and became an Area Service Manager (“ASM”) before the period in question in these appeals. Sue Morton was a Leader at the time the period in question started, becoming an ASM in 2004 and then a Regional Service Manager (“RSM”) later in 2005. Both gave evidence of their relationships with WW and others both as a Leader and as an ASM. The tribunal accepted their evidence as indicating their personal understandings of their own positions with WW at different times in their careers and their personal understandings of the difference between someone being an employee of WW and someone working with WW.

48 The tribunal also heard evidence from eight individuals who were Leaders for all or part of the period in question. As stated above, each of those individuals confirmed to the tribunal that she was an appellant in her own right with regard to the Section 8 decision applying to her as well as a witness in the Regulation 80 appeals, but was happy to accept the arguments presented as her arguments in the appeal. The eight appellants and witnesses, in the order in which they gave evidence, were:

(1) Mrs Laura Wright. She lives on the south coast of England. She has been a Leader since 2003 and has taken weekly WW meetings without a break save for holidays and sickness. She told the tribunal that she had taken an average of three meetings a week during the time she had been a Leader. She had previously been an employee in a fast food business. She was not involved in any other business activity while running the WW meetings.

(2) Mrs Dorothy Bush. She lives in the Yorkshire area. She has been a Leader since 2002. She was proud that she was a Triple Diamond Leader. The status of Triple Diamond Leader is awarded every two years to Leaders who have exceeded the relevant averages for a WW meeting, for example by reference to the number of members reaching their target weights. She had done this six years in succession. She was currently taking five meetings a week.

(3) Miss Sharon Lowes. She lives on the north east coast of England. She has been a Leader for ten years, having originally started as a member of a WW meeting to lose weight. She gave evidence that she had continued taking meetings as a Leader despite health problems for a time in the past imposing physical limits on her. She is currently still taking four meetings weekly and also has a full time job and other outside interests.

(4) Mrs Karel Bullock. She lives in south west England, and previously lived in the London area. She has been a Leader for WW since 1987, a total of 21 years. She is also a magistrate. Like Miss Lowes, she had been recruited as a Leader through the Leader of the meeting she was attending as a member. She is currently taking four meetings a week.

(5) Mrs Michele Mott. She lives in the Midlands. She joined WW as a member several years ago 2003 and successfully lost weight. She became a Leader in 2003 after reaching and maintaining her goal weight. She was working in other work part-time at that time. While working part time she could not commit to more than three meetings a week. She later ran up to nine meetings a week, but it has now reduced to seven meetings.

(6) Mrs Hayley Ridley. She lives in one of the northern cities of England. She also became involved as a member of a WW meeting. She became a Leader two years ago. She now takes 6 meetings a week.

(7) Mrs Judith Darbyshire. She lives in the north east of England. Like Mrs Bush she is a Triple Diamond Leader. And like others who gave evidence, she joined WW to lose weight, later being asked if she wished to be a Leader. She became a Leader 8 years ago. She is now a pensioner but still takes two weekly meetings.

(8) Mrs Helen Kidd. She lives in north east Scotland. She has been a Leader since 2001, having been appointed at about the start of the period in question for these appeals. She had been appointed below the then age limit for appointment, and had been active since save for the times when her children were born. She currently takes 6 meetings.

All the above had been interviewed on behalf both of WW as appellant in these appeals and by officers of HMRC.

49 Melanie Stubbings’ evidence was given on behalf of WW and accepted as such. The tribunal accepts that each of the other WW employees, and the individual Leaders who gave oral evidence, did so openly and conscientiously and in each case putting forward the position as she saw it personally but not as a representative of WW.

50 Both HMRC and WW had interviewed other individuals, and notes of interviews were produced by HMRC. Some of those notes of interviews had been seen and amended then signed by the individual Leaders while the copies of others placed before the tribunal had not. Mr Peacock objected to the production of those notes that had not been signed by the individuals. HMRC, despite the best endeavours of its legal team, were unable to produce the signed copies of several of those notes. It did not produce in evidence any statements from the officers who conducted the interviews and drafted the notes. The tribunal has taken account of those notes that were produced in a form that clearly showed that the individual had agreed to the text of the note. It does not put weight on any other. The tribunal also takes into account that one reason why some individuals did not appeal the Section 8 decisions made naming them may have been (and in one case clearly was) because the individual accepted the notice and had no intention of appealing. No point was made about other notices not appealed by the individual named in a notice. Nonetheless the tribunal has in mind that the evidence before it shows that it was not the unanimous view of Leaders that they were self-employed. And to the limited extent that weight can be put on the fact that an individual contended to be an employee chooses not to appeal against a decision stating this, while the person contended to be the employer does appeal, the tribunal takes that into account also in assessing its overall view of the status of a Leader.

51 Both parties produced an agreed bundle of documents. While many were the usual background documents to an appeal, some are central to a decision about the status of a Leader. For WW, Mr Peacock QC contended that the following documents formed the contract for services between a Leader and WW:

(1) Memorandum of Agreement for Student Leader (“the Agreement”). The tribunal saw a copy signed by the Vice President of WW and an individual (designated as “the student” in the document) in 1995. It also saw an unsigned blank copy of the form of agreement in use since 2000. The document quoted below is the more recent of these.

(2) Conditions relating to Weight Watchers Leaders (“the Conditions”). The tribunal saw a copy of these standard conditions said to be dated July 2003, and a copy of conditions relating to lecturers said to be dated April 2003. The copy does not provide for or invite signature and is not signed. The document quoted below is the more recent of these.

52 Mr Tolley contended that these were not the only documents that formed part of the legal contract between a Leader and WW. He also drew attention to other documents. The tribunal notes the following documents in the agreed bundle that are in its view potentially relevant to defining the relationship between a Leader and WW:

(1) Confidentiality memoranda. The tribunal was shown a series of these memoranda relating both to confidentiality in Weight Watchers confidential information generally and to specific programmes. They are signed and dated by a Leader but not WW.

(2) The training pack distributed to trainee Leaders as they begin their training. This is stated in the agreed documents to consist of:

(a) Trainee Leader Handbook. This is distributed at the start of a Leader’s training. The tribunal saw a booklet with the copyright date 2005, and an earlier version. The 2005 version has 31 pages. The booklet has the same final warning and wording as the Leader’s Policy Booklet below;

(b) Health and Safety booklet. The tribunal was shown copies of this.

(d) A Weight Watchers Leader’s Policy Booklet. The tribunal was shown successive copies of this booklet dated from 1999. The most recent is The Leader Policy Booklet 2005/2007. It consists of 45 pages. The user is warned that the booklet remains the property of WW to be returned to WW on demand, and that nothing in the booklet is to be used, reproduced or distributed without the express written permission of WW. But it also states that it “is provided for your use as a WW Leader.” The tribunal takes that to be the written permission to use the booklet for WW purposes only.

(e) Helpers for your Meeting book. The tribunal was not shown copies of this.

(f) “Goal weight” and “10% weight loss” charts. The tribunal was shown copies of various weight charts.

(3) Self-employment and Income Tax 2004/2005. The tribunal was shown a number of copies of this booklet or its equivalent for other years. The 2004/2005 booklet deals with self-employment generally and is not confined to details about income tax or National insurance contributions. It emphasises the consequences of Leaders being self-employed.

(4) Meeting guides. The tribunal was shown examples of the monthly guides sent to Leaders. These gave a suggested meeting theme for each week together with leaflets to back the theme. The guide gives a minute by minute detailed timetable suggested for each meeting. These have a detailed common form. They set and define a topic, and what the members should go home from the meeting understanding and go home feeling. They then provide the suggested timetable, for example: 2-3 minutes welcome; 2-3 minutes getting meeting started with questions; 10-12 minutes on group discussion on theme, including weight loss recognition; 2-3 minutes highlighting a product (the guides suggests a different product each week); helping disappointed members (3-4 minutes); getting commitments (2-3 minutes). The leaflets also enclose visual ideas, suggestions of seating plans for the meeting room, suggestions for the activity table, and suggestions for activities to accompany the weighing process.

53 As this shows, the parties were not in agreement about which documents formed, or formed part of, the contractual relationship between a leader and WW. Nor were they in agreement about whether the contract between a Leader and WW consisted of a single continuing contract or an umbrella contract with specific contracts apply to specific aspects of the relationship between the parties. These are therefore questions that the tribunal must decide as part of the general issue before it.

What contracts were in place?

54 In order to focus the discussion about the contracts and other legal relationships between WW and its leaders, the tribunal invited both parties to assist it in identifying the network of legal relationships existing between WW, the Leaders, others involved such as the helpers and those who provide accommodation, and the members or customers.

55 It was common ground between the parties that the first issue to be decided by the tribunal was that of identifying what contracts were in existence between WW, the Leaders, and others in the period in question. The following relationships were agreed to be common ground between the parties:

(1) It was common ground that a contract or contracts existed between WW and each Leader. The nature of that contract or those contracts was not agreed and was the key issue in the appeals. Nor was the identity of the contract agreed. The tribunal considers below whether there was a single contract or multiple contracts, or a combination of both, during the period. The tribunal interprets the Main Appellant’s submissions as assuming a single continuing contract between WW and a Leader. One interpretation of the argument for HMRC was that there was a series of contracts. A third possible approach was that there was an umbrella contract or standard terms applied by a series of specific contracts.

(2) It was common ground that a contract existed between WW and each member with regard to the status of membership or as regards membership at a particular meeting. Neither party gave detailed consideration to the nature of that contractual relationship. As it was common ground that there was no contract between a Leader and a member, the tribunal agrees that nothing turns on the precise contractual nexus between WW and members as regards the conduct of meetings. The position with regard to sales of WW products to members by a Leader may, however, raise considerations of direct relevance to the tribunal’s decision.

(3) It was common ground that a contract of sale of goods existed between WW and any member that purchased any WW item at a WW meeting. It follows that a member who purchased a number of items at different meetings had a series of separate contracts with WW in respect of each purchase.

(4) It was common ground that no contract existed between a Leader and a member within the scope of these appeals. This applies both to attendance and participation at meetings and purchases of items from WW.

(5) It was common ground that a Leader was not permitted by the scope of her contract with WW to enter into any contract with any other person that resulted in competition or conflicting obligations to with that contract.

56 The tribunal considered the following other relationships that were or might be relevant to the scope and nature of the contract between WW and a Leader:

(1) The relationship between one Leader and another when one took a meeting for another. This is central to one argument by Mr Peacock QC that the Leaders cannot be employees. The tribunal therefore considers this in detail below.

(2) The contract for the hire of the premises where a meeting was held. The tribunal finds that the contract was between WW and the relevant landlord. In so far as a Leader agreed the contract with the landlord she did so on behalf of WW.

(3) Whether a contract existed between a helper and a Leader. The relationship between some Leaders and some helpers may have been contractual, but that was not necessarily the case. Nor did the tribunal have evidence from which it could conclude that there would normally be an intention to create a legal relationship between a Leader and her helper(s).

(4) The extent to which a Leader was, and was held out to be, acting on behalf of WW in selling goods or supplying or being supplied with services. The tribunal finds that the Leader acted on behalf of WW in a variety of capacities, for example reaching agreements with a landlord for the hire of premises and promoting and selling WW goods at WW meetings. In each case the contract was between WW and the other party, not the Leader.

(5) Whether an agreement existed between a helper and WW. It was not argued for HMRC that there was a contract of any kind between a helper and WW. In particular, Mr Tolley accepted that the phrase “and other employed earners” in the original determinations against WW did not, and was never intended to, include helpers. The tribunal accepts that and finds that there was no contract relevant to these appeals between WW and helpers.

The relationships between WW and a Leader

57 The tribunal’s focus within this net of relationships is on the relationship or relationships between WW and each Leader. It was common ground that the link was contractual, and that mutuality existed. The form of that link was not agreed. The tribunal must therefore identify and determine the nature of that contract or those contracts. In the tribunal’s view it was not obvious that there was a single contract that applied to all the activities undertaken by a Leader for or in the name of WW. There are two reasons for this. First, Mr Tolley argued that the proper analysis may be that a Leader had a series of individual contracts for each series of meetings or, perhaps, each individual meeting. Second, there are two separate aspects to the actions undertaken by a Leader in respect of a meeting.

58 The tribunal finds that a Leader undertakes two essential sets of activities:

(a) Those resulting from her responsibility for setting up and running WW meetings on a weekly basis. Setting up a weekly meeting involves identifying a location for the meeting; arranging for the hire of the premises; and arranging publicity for the meeting. Running a weekly meeting involves weighing and recording the weight of each member, collecting or checking the member’s payment for attending, and – for those members who wished to stay for it – presenting a talk or leading a discussion on a relevant topic.

(b) Those resulting from her presentation for sale, and sale, of WW produce to members. This involves the actions necessary in selecting and ordering stock for sale; taking delivery of the stock, storing it and transporting it to and from a meeting; and display and sale of the stock at the meeting. (“Produce” is mainly food and similar items but can include hardware such as weighing scales.)

59 The tribunal is therefore concerned to examine the documents said to be the documents representing the contract or contracts between the parties and the other evidence to see how those issues are handled by the parties. Before it does so, it must also deal with the competing submissions of the parties about the factors it should take into account in identifying the contracts as well as in identifying the essential nature of the contracts.

The submissions of the parties

60 The single question behind all the decisions is whether, in the year in question, named individual Leaders, and Leaders as a category of individual, were employees of WW. It was common ground between the parties that at any one time all Leaders had the same status and had essentially the same contractual relationship with WW. Both parties also assumed that this status remained the same throughout the years under appeal. The tribunal saw no reason to divide the category of Leaders and approached the appeals on the basis that all Leaders had the same status in any one year. It also considered whether there was evidence of any change of that status during the years under consideration and found none of significance.

61 Following its consideration that the contract between WW and a Leader may reflect a complex of relationships rather than a single relationship, the tribunal must consider the form and content of the contractual relationship.

62 The central contention of Mr Tolley was that all earnings of Leaders from their work with WW were in the form of earnings as employed earners. The contracts from which those earnings were derived were contracts of employment. The grounds of appeal for WW were that all the earnings of all the Leaders derived from WW were derived by them as income from self-employment. The individual appellants who were heard by the tribunal also all submitted that they were self-employed and were not employees of WW.

63 The tribunal heard the evidence of eight individual Leaders who considered themselves to be self-employed. The tribunal accepts that this was the view of each individual, and that that is why she is an appellant before the tribunal. It also found that these were personal views and did not reflect more than the individual’s view of the comparative positions of employee and self-employed individual. Documentary evidence before the tribunal suggested that some other Leaders regarded themselves as employees and not as self-employed. Any such Leader would have no interest in being an appellant before the tribunal, and the tribunal heard no detailed evidence from any Leader claiming to be an employee. However, the tribunal puts little weight on this. It finds that the status of a Leader can be determined in general terms. Having heard the evidence from all the witnesses, it saw no evidence of significant divergence in the terms and conditions of individual Leaders. Rather, it found a high level of consistency in the terms applied to all Leaders. In particular, it found that all Leaders were paid by reference to a common tariff throughout Britain. And it found no evidence of individual negotiation of remuneration or any other terms between WW and Leaders. While there were individual variations in the way ASMs worked with Leaders, and the extent to which the obligations on a Leader were strictly enforced, the tribunal finds that the status of a Leader was the same for all Leaders at all relevant times. Although relevant variations might be possible, the tribunal finds none in the evidence of the witnesses before it or in the documentary evidence.

64 Mr Peacock QC based his analysis of whether Leaders were employees on the well known tests laid down by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 515:

“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 contact of service.”

65 Mr Peacock QC submitted that the first of those tests, often referred to as the test of mutuality of obligation, was only satisfied if the contract between the parties required the employee to “provide his own skill and work”. If he could delegate or bring in the work of some other person, then this condition was not met. He put weight in his argument on what he submitted was the power of a Leader to delegate her meeting to another Leader. The tribunal examines this below.

66 The second test, of control, was explained by Mackenna J as follows:

“As to (ii). Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant.”

Mr Peacock QC also put weight on the submission that the terms of the contract between a Leader and WW were such that WW did not have control over a Leader’s activities to the extent that it could be regarded as a contract of employment.

67 The third test applies if these two tests are met. As Mr Peacock QC put it, the tribunal must then consider whether, standing back and looking at the contract as a whole, the contract is consistent with being a contract of service. The issue is not whether there are factors, or even numerous factors, which point in favour of a contract of service. As to the features to be noted, he took the tribunal to the summary in Harvey on Industrial Relations and Employment Law at division A. At paragraphs [81] and [82] of that division, the learned editors comment:

“[81] It is impossible to draw up a complete list of criteria to be considered when deciding whether a contract is one of employment or one for services: Maurice Graham Ltd v Brunswick (1974) 16 KIR 158, Div Ct; Warner Holidays Ltd v Secretary of State for Social Services, [1983] ICR 440. Each case must be considered on its own facts. But some of the features which may be relevant are as follows.

[82] First, as seen above, there is the degree of control: the greater the scope for individual judgment on the part of the worker, the more likely he will be an independent contractor. In addition to this traditional indicator, it may be relevant to consider the following factors:

● What was the amount of the remuneration and how was it paid?—a regular wage or salary tends towards a contract of service; profit sharing or the submission of invoices for set amounts of work done, towards independence.

● How far, if at all, did the worker invest in his own future: who provided the capital and who risked the loss?

● Who provided the tools and equipment?

● Was the worker tied to one employer, or was he free to work for others (especially rival enterprises)? Conversely, how strong or otherwise is the obligation on the worker to work for that particular employer, if and when called on to do so?

● Was there a 'traditional structure' of employment in the trade?

● How did the parties themselves see the relationship?

● What were the arrangements for the payment of income tax and national insurance?

● How was the arrangement terminable?—a power of dismissal smacks of employment.

In addition to such 'structural' matters, it may also be very relevant to look at the particular terms of the contract in question; for example, a genuine contract for services would not normally be expected to provide for sick pay or contractual holiday or pension entitlements. Many of these factors have traditionally featured heavily in income tax law (where they have tended to be called 'badges of employment'); in the employment law context, they may be seen as consistent with the 'multiple test' adopted in most of the cases.”

68 Mr Tolley also took us to Harvey, where he drew the tribunal’s attention to the comments at A [159], under the heading “independent contractors”. The tribunal considers it helpful to note the whole of that short section:

“[156] An independent contractor is one who enters a contract for services as opposed to a contract of employment. The employer buys not so much the right to the worker's service, as the right to the end product of his labour. He pays him not so much to do the job as to get the job done. The independent contractor may be described in various ways: freelance, self-employed, indirect worker, worker on the lump (i.e. 'on the [basis that he is paid a] lump [sum]' for the job instead of a regular wage).

[157] The contractor is independent in the sense that he is responsible for making his own decisions in performing the job, by way of contrast with the servant who is subject to the directions of the employer. Economically, he stands on his own two feet. He is in business on his own account.

[158] That at least is the theory. But both employers and workers see advantages in the worker becoming an independent contractor rather than a servant. The employer is freed from any statutory and other obligations. The independent contractor (assessed under Sch D) enjoys a favourable tax position as compared with the servant (assessed under Sch E), and—if he is dishonest—greater opportunities for tax evasion.

[159] There has grown up therefore a new breed of independent contractor: one who contracts personally to execute the contract, and who is an employee in everything but name. Jobs which have traditionally been occupied by servants have been given over to so-called independent contractors. The building industry is a notable example, the IT sector another. In some cases the move from service to independence represents a genuine attempt to seek greater flexibility in employment to the advantage of both sides; but frequently it is no more than a device which seeks to avoid the normal legal consequences that attach to the employment relationship.

[160] However the courts can and do react against such abuse of the law. Note in particular the case of Young and Woods Ltd v West [1980] IRLR 201, CA, where a sheet metalworker deliberately opted for independent status but was nevertheless declared by the Court of Appeal to be a servant. One problem for both sides if this happens is that Revenue and Customs may well revisit the tax position (going back at least six years, more if there was fraud), re-categorise the worker as an 'employee' and levy extra tax. Moreover, the employer now owes back-dated national insurance contributions and, if the employee cannot pay the back-tax, may be pursued for the outstanding income tax too because he should have been operating the PAYE system all along.”

69 Mr Tolley agreed with Mr Peacock QC that the starting point for the relevant law was with Ready Mixed Concrete. He emphasised the necessity of distinguishing the test of mutuality from that of control as emphasised by Elias J in Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471, [11]:

“The significance of mutuality is that it determines whether there is a contract in existence at all. The significance of control is that it determines whether, if there is a contract in place, it can properly be classified as a contract of service, rather than any other kind of contract.”

Elias J went on to say:

“[13] The question of mutuality of obligation, however, poses no difficulties during the period when the individual is actually working. For the period of such employment a contract must, in our view, clearly exist. For that duration the individual clearly undertakes to work and the employer in turn undertakes to pay for the work done. This is so, even if the contract is terminable on either side at will. Unless and until the power to terminate is exercised, these mutual obligations (to work on the one hand and to be paid on the other) will continue to exist and will provide fundamental mutual obligations.

[14] The issue whether the employed person is required to accept work if offered, or whether the employer is obliged to offer work as available is irrelevant to the question whether a contract exists at all during the period when the work is actually being performed. The only question then is whether there is sufficient control to give rise to a conclusion that the contractual relationship which does exist is one of a contract of service or not.”

70 The tribunal was taken to a number of other authorities to support the contentions of the parties about the tests to be applied, and the relative emphasis as between the tests. The tribunal found a decision of the Privy Council to be of particular assistance.

71 Narich v Commissioner of Pay-Roll Tax [1984] ICR 286 is a decision of the Judicial Committee of the Privy Council on an appeal from the Supreme Court of New South Wales about the then equivalent of the Weightwatchers programme in Australia. At that time in Australia, and in Britain, the individuals now called leaders were called lecturers. The central question in that appeal was the same as in this appeal. Were the contracts between the appellant company and the lecturers contracts of service? The appellant company was the franchisee in Australia of Weight Watchers International. If it was the employer of the lecturers, then the appellant company was liable to pay-roll tax on the remuneration paid to them under those contracts. Their Lordships found themselves in complete agreement with the judge at first instance in the appeal when he decided that:

“There was imposed upon every lecturer a number of obligations as to the manner in which the lecture was to be conducted, the information to be imparted to the members and obligation not to exceed a specified weight. With the right to terminate such as it was, the plaintiff was clearly able to control not only the task allotted to the lecturer but the manner in which the task was performed.”

72 Their Lordships limited their own review of the Australian and English caselaw to reliance on one decision and citation of a second. The decision on which their Lordships relied was that of the Judicial Committee in Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385. Their Lordships drew in particular on the judgment in that case as delivered by Lord Fraser of Tullybelton. It:

“is authority for three principles of law applicable to a case of the present kind. The first principle is that, subject to one exception, where there is a written contract between the parties whose relationship is in issue, a court is confined, in determining the nature of that relationship, to a consideration of the terms, expressed or implied, of that contract in the light of the circumstances surrounding the making of it; and it is not entitled to consider also the manner in which the parties subsequently acted in pursuance of such a contract…

The second principle is that, while all other relevant terms of the contract must be regarded, the most important, and in most cases the decisive, criterion for determining the relationship between the parties is the extent to which the person, whose status as employee or independent contractor is in issue, is under the direction and control of the other party to the contract with regard to the manner in which he does his work under it…

The third principle relates to cases where the parties have, as in the present case, included in their written contract an express provision purporting to define the status of the party engaged under it…

Their Lordships repeated the citation in AMP of the judgment of Lord Denning MR in Massey v Crown Life Insurance Ltd [1978] 1 WLR 676 at 679 that:

“if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label on it.”

73 The tribunal was taken to a considerable number of other cases on these issues, but none were delivered by judges of similar status to those who gave this decision. While it is not binding in a technical sense on this tribunal, it is clearly entitled to the highest respect as a clear guide to the approach it should take on facts not too far removed from those before the Judicial Committee in that case. Indeed, the tribunal, as a fact-finding tribunal, considers it a useful guide to the significance to be given to aspects of the arrangements that then applied to those lecturers as compared with the arrangements that now apply to Leaders. It notes, for example, that there is no mention in the Judicial Committee decision of any arrangements for the sale of products by lecturers. At the same time the tribunal was careful to avoid considering that the decision of their Lordships was in any way decisive as an indication of the relevant facts in these appeals.

74 Their Lordships were not concerned with details beyond the key question of the nature of the contracts between the parties. They found, in the dramatic phrase of Lord Brandon giving the judgment of the court, that “the plain situation in law is that a lecturer is tied hand and foot by the contract with regard to the manner in which she performs her work under it… the only possible conclusion is that she is an employee.”

75 The tribunal respectfully considers that this case is not only of the highest judicial authority but is also the closest guide to the relevant law of the many put before it by the parties in argument. It accepts, following the opinion of their Lordships in AMP, that on this point the relevant law of New South Wales and the law of England and Wales are effectively the same. It therefore turns to examine the evidence about the contracts between WW and the Leaders with those principles in mind.

Documents establishing the conditions applying to Weight Watchers Leaders

76 WW produced two key documents that it contended defined the relationship between Leaders and WW. The first was an agreement between WW and a student Leader. The second stated conditions relating to WW Leaders.

77 The first of the documents is the Memorandum of Agreement for Student Leader (“the Agreement”). The Agreement is drafted as an agreement to be signed both by a student Leader and for WW. The key provisions in the current version of the Agreement (using the abbreviation WW and repeating typing and other mistakes in the original) are:

“1 WW agrees: -

(i) On or before the date of this agreement to instruct the Student in the techniques, systems, methods and principles concerned with weight reduction and control using the group involvement and controlled eating and physical activity plans developed, used and promoted by WW and its associated companies for use in the United Kingdom (collectively “the WW Programme”) together with instructions on the procedures for administration, promotion, and publicity, and

(ii) to provide such training to the Student as will enable him/her to carry on a practice of conducting Meetings for weight reduction and weight control in accordance with the WW Programme, including advice on the setting up and contents of WW Meetings.

2 Inconsideration of the above, the Student agrees to abide by the confidentially undertaking and restrictive covenants contained in Clauses 4 and 5 hereof and further agrees to pay to WW the sum of £50 towards the cost of such training (WW agrees to waive the balance of its training costs).

3 The Student acknowledges that during the period of his/her instruction and training he/she will have access to confidential information including but not limited to programme materials, saleable stock, Leaders and Training materials and trade secrets of WW and agrees that he/she will not: -

(i) at any time after the date of this Agreement, unless conducting WW Meetings or except where specifically authorized by WW, represent himself/herself or permit himself/herself to be held out as being in any way connected or associated with the business carried out by WW, or as acting on behalf of WW.

(ii) At any time after the date of this Agreement, except in the proper course of his/her practice as a WW Leader, disclose to any person, firm or company (other than those authorized by WW) documents and other property supplied to him/her by WW or any of the WW Programme or any other copyright material or confidential information relating to the business or affairs of WW which may become known by or be entrusted to him/her at any time.

(iii) For the period of six months after the date of completion of his/her course of instruction and training (or, if the Student shall after that date conduct WW Meetings, six months after the date on which the Student in whatever capacity, last conducted or assisted in the conduct of such a Meeting) either personally or on behalf of any other person, firm or company, canvass, solicit, or approach, or cause to be canvassed, solicited or approached, in respect of any matter concerned with Weight reduction or weight control, the custom of any person who was a Member of any WW meetings, attended (or conducted) by him/her, at any time during the period of six months preceding that date.

4 If the Student in whatever capacity shall at any time conduct or assist in the conduct of WW Meetings, he/she agrees that, for a period of six months he/she will not (without prior written consent of WW) within a radius of two miles of any place or places where he/she last conducted a WW Meeting on a regular basis, either in his/her own account or on behalf of any person, firm or company besides WW, give or hold lectures, seminars or group meetings concerned with weight reduction or weight control.

…

6 If the Student shall, following his/her course of instruction and training, qualify as a WW Leader, and shall thereafter practice as such, he/she will at all times abide by the conditions for the time being in force governing such practice. In such event, his/her ASM shall hold regular meetings at which he/she will: -

(i) be informed of any improvements to the WW Programme

(ii) receive further training relating to the WW Programme, and

(iii) be assisted with the maintenance of his/her Goal Weight

and he/she shall use his/her best endeavours to attend such meetings.”

78 The other document is the statement of Conditions relating to WW Leaders (“the Conditions”). The document setting out the Conditions is not in the form of an agreement, nor is it signed or dated. It is prefaced:

“The following conditions govern the relationship between Weight Watchers (UK) Limited (“Weight Watchers”) and any leader engaged to conduct Weight Watchers meetings (“the Leader”).

The main Conditions are as follows (using the abbreviation WW, and retaining the errors in the original):

“1 WW shall retain the leader for the purpose of presenting the WW

Programme.

2 The Leader may cease to be a WW Leader at any time by giving

written notice to that effect to WW. (Either party may terminate this Agreement

at any time by giving notice to that effect to the other.)

3 During the continuance of this Agreement the Leader shall devote such

of his/her attention and abilities to the business of WW as is necessary for the

proper performance of his/her services hereunder. Save as aforesaid the Leader

is free at his/her discretion to devote as much or as little time to WW as he/she

chooses.

4 From the date of this Agreement the Leader shall receive in

consideration for his/her services in taking a WW meeting the commission

calculated in accordance with the scale of the leaders fees then currently in force

(as notified to the Leader from time to time) the Company will in its sole

discretion reimburse agreed expenses incurred by the Leader in connection with

such meetings.

5 During the subsistence of this Agreement the Leader shall be an

independent contractor and not the servant of WW and in such capacity will

bear sole responsibility for the stamping of his/her National Insurance card as a

self-employed person (if applicable) and for discharge of any income tax

liability arising out of fees paid for the services performed by the Leader under

the Agreement.

6 The Leader shall, in his/her discretion fix the time, date and place of

any WW meetings he/she agrees to take. All arrangements for the hire of halls

or other meeting places requires specific approval from the Area Service

Manager. Such arrangements will be in the name of WW who will be

responsible for paying all hiring charges.

7 The Leader shall retain such clerks and weighers as he/she considers

desirable for any class and will be responsible for the division as he/she thinks

fit amount any such clerks and weighers of the aggregate allowance for clerks

and weighers. All such clerks and weighers shall be members of WW.

8 Subject to Clause 1 the Leader has an absolute discretion as to how any

particular class is conducted.

9 WW will provide reasonable quantities of classroom and advertising

material for use in the conduct of any WW meeting taken by the Leader,

provided that all such materials not given to members outright shall remain the

property of WW and shall be returned to WW if it so requests at any time.

10 If the Leader does not propose to take any particular meeting on any

particular occasion and is unable to find a suitably qualified replacement, WW

will if so requested by the Leader, attempt to provide Such replacement and for

this purpose the Leader will give the Areas Service Manager as much prior

notice as possible.

11 The Leader will contact all membership and other fees from class

members in accordance with the current scales of fees payable by members of

WW and shall promptly remit the same to WW after deduction of the

commission payable to him/her in respect of the meeting concerned together

with any other sum in order to defray expenses which WW may request the

Leader so to deduct.

12 So long as the Leader shall continue to be a WW Leader he/she will

not be concerned with or involved in any other business relating to the conduct

of weight control meetings.

…

14 The parties hereto agree with each other that they will at all times act

with each other in the utmost good faith as to promote each other’s best

interests. In particular WW will from time to time assist the Leader in the

advertising and promotion of the meetings to be conducted by The Leader and

shall where appropriate refer all enquiries received by WW from potential

attendees of the Leaders meetings to the Leader.

15 In view of its importance to the maintenance of the reputation of WW,

the Leader shall at all times maintain his/her appropriate weight as determined

in accordance with WW.

…

17 These conditions shall be capable of being varied only by supplemental

agreement or memorandum in writing signed by or on behalf of WW and the

Leader.”

79 Both parties took the tribunal to various other documents setting out, or purporting to set out, the relationships between the parties. Mr Peacock QC argued that these documents were not part of the contract between the parties. They either stated obligations on the parties (either to each other or to third parties) as part of the general law or were aspirational.

80 Clause 17 of the Conditions suggests that there can be no further document supplementing or changing “these conditions” unless it is also signed as required by clause 17. The tribunal was not taken to any documents of relevance signed by both WW and the Leader other than the Agreement signed by individual Leaders as student Leaders and by WW. (The only other relevant documents signed by Leaders were non-disclosure documents or confidentiality documents). That is open to two interpretations and applications to the facts. One is that there is a single contract between the parties and that the Agreement and Conditions, and only these documents, are constitutive of it. The other is that “these conditions” form a framework or skeleton contract between the parties and that application of the conditions to a particular Leader and a particular meeting requires a second, specific, contract between WW and the Leader who actually takes the meeting or series of meetings. If that is so, the second, specific, contract is not in writing and is therefore not subject to clause 17.

Analysis of those documents

81 The tribunal finds itself in the same position on one important issue as it notes from the report of Narich before the Privy Council. There are no written terms and conditions in the two key documents relating to the sale by Leaders of WW products at their meetings. If Mr Peacock QC is correct in his submission, then there are no express contractual obligations of any kind on the Leaders with regard to sales of WW products other than the confidentiality provisions. If that analysis is correct then those sales are, the tribunal must conclude, not an essential part of the contract between WW and a Leader. Alternatively, there must be implied contractual provisions between them. Are the obligations of a Leader in handling and selling products to be considered only as a matter of general law, or is there another contract? Leaders receive payment from WW for all sales at a set, predetermined rate so there must be some mutuality of agreement for which the payment by WW is the consideration. That point is of importance given the findings of fact of the tribunal that a Leader plays two essentially different roles in her dealings with both WW and members.

82 The tribunal finds that the contractual documents to which the tribunal were taken by the Appellant deal with one only of those roles, and are therefore not fully constitutive of the contractual relationship between WW and Leaders.

The Agreement

83 The Agreement is clearly a key document as it is the only document drawn up on the form of a contract and signed by both WW and the Leader. But it is not a document that defines the relationship between a Leader and WW in entirety, even aside from the issue of selling products. There is, for example, no agreement by the student Leader to take any meetings even if asked to do so, or to take any steps towards any meetings. Nor is there anything about selling products. The only positive obligations of a student leader under the Agreement are: in clause 2 to abide by clauses 4 and 5; in clause 2 to pay £50; in clause 5 to return the items stated if asked; and in clause 6 to use best endeavours to attend training and similar meetings. In addition, in clause 6 the student Leader, if he or she qualifies as a Leader, agrees to “at all times abide by the conditions for the time being in force governing” the practice of being a Leader and holding WW meetings.

84 WW agrees in the Agreement to instruct and train the student Leader. Clause 1.i. defines “the WW Programme” and provides for instruction about it. Clause 1(ii) provides for training in carrying on meetings “in accordance with the WW Programme”. WW, on its own submissions, agrees nothing else. For these purposes, “the WW Programme” is therefore defined as:

“the techniques, systems, methods and principles concerned with weight reduction and control using the group involvement and controlled eating and physical activity plans developed, used and promoted by WW and its associated companies for use in the United Kingdom…”

That definition must, in the view of the tribunal, be read with clause 1 of the Conditions. The Leader is retained “for the purpose of presenting the WW Programme” and not for any other stated purpose.

The Conditions

85 Bearing that and the other provisions of the Agreement in mind, the tribunal finds a number of inconsistencies in the Conditions. It observes more generally that the Conditions are set out in a loosely drafted document containing some curious errors and inconsistencies for a document that is said to provide definitive standard conditions for all Leaders at any one time. For example, while some clauses refer to meetings (1, 4, 6, 10, 12, 14), other refers to classes (7, 8, 9, 11, 16). They appear to refer to the same thing, but there are no defined terms in the conditions despite a use (inconsistent) of capital letters for nouns that suggest that some terms should be defined. This is particularly relevant to the repeated use in the Conditions of the term “this Agreement” (see clauses 2, 3, 4, 5). Clause 4 specifically refers to “the date of this Agreement”. The tribunal was given no evidence that the Conditions were given any date that could be referred to as “the date” in connection with the application of the Conditions to any individual Leader.

86 The tribunal must, of course, pay attention to the self-employment clause, clause 5. This is curiously archaic in its drafting. The duty to stamp National Insurance cards as the sole means of paying Class 2 National Insurance contributions ceased long ago. And the term “servant” is redolent of the older authorities. It is also a matter for consideration that this condition is, despite its asserted significance, listed only as one of the series of Conditions, and not as one of the terms of the signed Agreement between the parties. There is another difficulty in determining the way that clause 5 is intended to apply. Its specific terminology is that “During the subsistence of this Agreement the Leader shall be an independent contractor.” As the tribunal has noted above, it is not clear what “this Agreement” is, nor when it started. The term “Agreement” is not defined in the Conditions, nor is there any wording of the kind found in the Agreement to indicate that the Conditions are in fact part of an agreement rather than an imposed set of conditions. Nor is there any signature to any copy of the Conditions shown to the tribunal, nor any date on or added to it, to show when or if a particular Leader was aware of the condition. However, the tribunal accepts oral evidence of individual appellants that they were aware of the issue.

87 Clause 6 of the Conditions is internally inconsistent. It purports to give a Leader discretion over the time, date and place of a meeting, but then takes it away again. All arrangements for the hire of a meeting place require specific approval of an ASM. The tribunal finds that this imposes a complete practical veto on the plans of a Leader with whom an ASM does not agree. The ASM can simply refuse to agree to the hire of those premises, or to the hire at that time or on that day. Further, clause 6 imposes a continuing control over the existence of a meeting or class, as WW can end the hire arrangements at any time without reference to the Leader. This suggests a considerable degree of control by WW over the activities of a Leader. While she may be at liberty to make provisional arrangements, she has no power to confirm them.

88 Clause 8 of the Conditions is of particular importance in the argument that a Leader is not under the control of WW. It states that it gives a Leader an “absolute” discretion as to how any particular class is conducted.

89 The tribunal does not accept that the discretion given to the Leader is “absolute”. It therefore rejects arguments founded on this stated width of discretion. This is for the following reasons. Clause 8 is expressly subject to clause 1. Further, both conditions are to be read with the Agreement (defining the Programme referred to in clause 1) and with the obligation in clause 14 of the Conditions that the Leader must always act with the utmost good faith to protect WW’s interests. In that context, the Leader does not have an “absolute” discretion in any meaningful sense. She must follow the Programme. While she may not find that the precise timetable helpfully set out in considerable detail in the notes for the particular week are the best way forward, she is expected to deliver the Programme. That is why she is retained.

90 The formulation of clause 8, if read as providing literally for an absolute discretion, has two important omissions in the context of the findings made by the tribunal. There is a complete absence of anything to do with promoting and selling WW’s products. And there is a complete absence from this formulation of what the tribunal find as fact to be the central purpose for most members of a WW meeting or class – what they pay for - namely, the confidential weighing and recording of a member’s weight as the reference point for her involvement in the Programme. The member is there to attain her goal weight. A Leader must make provision to weigh her and note her progress towards, and attainment of, that goal weight. That is central to all descriptions of the Programme. This absence of provision is despite the express clause, clause 7, in the Conditions about clerks and weighers. Indeed, Clause 7 does not make sense without reading into the Conditions an obligation to undertake the weighing and recording for which the Leader is to retain the clerks and weighers. (In passing, the tribunal notes this as another inconsistency in the documentation. Clerks and weighers are now called helpers).

91 The phrase “absolute discretion” in clause 8 must be read in that context. The tribunal finds that it is not, in any meaningful sense, an absolute discretion. If clause 8 stood alone, to be interpreted literally and in isolation, a Leader could if she wished decide not to bother with weighing and recording her members’ weights nor to bother with selling WW products. The tribunal anticipates that WW would be able and ready to deploy clause 14 against any Leader who chose to act in that way. The Leader must always act in the utmost good faith to promote WW’s interests. WW’s interests clearly centre on the “weigh and pay” aspect of the operation. WW’s corporate accounts and the targets it sets its ASMs for attainment by individual Leaders both show the importance to WW of the levels of sales attained by Leaders.

92 Clause 8 is also subject to clause 2. On its face clause 2 provides that both parties can terminate the agreement at any time. In practice, there is a slight limit on a Leader because she must give her notice in writing. WW does not have to do that. It can terminate the agreement verbally without notice.

93 Both parties put weight on the importance of clause 10, while drawing radically different conclusions about it. Mr Tolley submitted that this clause could be described as a sham in the sense set out in the Protectacoat case. In Protectacoat Firthglow Ltd v Szilagyi [2009] IRLR 365, [2009] EWCA Civ 98, the Court of Appeal held that an employment judge had not erred in finding that a partnership agreement and a services agreement were shams. AT [50] Smith LJ, giving a judgment with which both Keene and Sedley LJJ agreed, summarised the position as follows:

“The kernel of all these dicta (the decisions rehearsed in the decision) is that the court or tribunal has to consider whether or not the words of the written contract represent the true intentions or expectations of the parties, not only at the inception of the contract but, if appropriate, as time goes by.”

94 Mr Tolley also contended, on a narrower basis, that a proper construction of the clause in its context did not, as it was suggested for the Appellants it did, give an unlimited power to delegate. What happened was different. In making this point he relied on the case of Tanton and distinguished it from the previous case of Macfarlane. The distinction arose because where a Leader (“the usual Leader”) asked another Leader (“the replacement Leader”) to substitute for her, the proper analysis of the contractual relationship with regard to the meeting, and therefore the fee for running the meeting, was that WW paid the substitute Leader direct (by allowing her to retain the fee from the sums collected by her at the meeting) and paid the usual Leader nothing. The usual Leader paid the substitute Leader nothing. There was no contract subsisting between the usual Leader and either WW or the substitute Leader for the meeting. There was in that sense no delegation. The usual Leader was not providing any services for the purposes of that meeting, and was not receiving anything at all for it. That was not delegation. It was substitution.

95 For WW, Mr Peacock QC emphasised in both the evidence he produced and in submissions that one of the reasons why it viewed the Leaders as self-employed was that WW made no promise to them that it would provide them with work. Equally, WW accepted that a Leader was not under any obligation to continue working with WW, and that she could terminate her relationship with WW at any time without any period of notice. That, he argued, was consistent with contracts of services but not a contract for service. The particular significance of this argument, on the facts put in evidence in the case, is with regard to the practice – of which there was both documentary and oral evidence -under which one Leader can invite another Leader to take a meeting for her. Read with this clause in the Conditions, this was submitted by Mr Peacock QC to be evidence that the relationship between a Leader and WW was, and could only be, a contract for services. A Leader was, he submitted, able at any time to provide a substitute. She did not have to undertake her contractual obligations to WW herself. Clause 10 confirmed the position. In practice, this was only done on a limited basis, but the evidence was that it was done and the extent did not alter the legal position. That was the only proper interpretation of clause 10. The fact that the Leader who was being substituted had no room to profit from doing so was neither here nor there.

96 The tribunal considered the following authorities with regard to these points. In Express and Echo Publications Ltd v Tanton, [1999] IRLR 367, the Court of Appeal allowed the employer’s appeal against a decision of the Employment Appeal Tribunal. The case concerned a driver made redundant by the employer, but then reengaged by that company on what the company intended to be a self-employed basis. As part of the contract between the company and the driver, they agreed that the driver could “arrange at his own expense entirely for another suitable person to perform the services”. This was found by the employment tribunal not to be a sham. Peter Gibson LJ, giving a judgment with which the other Lord Justices agreed, commented that this was “a remarkable clause to find in a contract of service ([26]). He went on to states that, by reference to the facts and decision in Ready Mixed Concrete, this was an even clearer case of the power to delegate meaning that the driver was not obliged to perform any services personally. He concluded (at [31]) that:

“it is, in my judgment, established on the authorities that where, as here, a person who works for another is not required to perform his services personally, then as a matter of law the relationship between the worker and the person for whom he works is not that of employee and employer.”

The Court of Appeal allowed the company’s appeal on that ground.

97 In Macfarlane v Glasgow City Council [2001] IRLR 7, the Employment Appeal Tribunal, chaired by its President, Lindsay J, allowed an appeal on the grounds that that case could be distinguished from Tanton. This again was a case where individuals who had been employees were given new contracts that the Council contended were contracts for services. The contracts contained provisions from which the tribunal held: “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.” The tribunal went on to reason, by reference to Tanton, that because the applicants in the case could arrange substitution they could not be employees.

98 Lindsay J (at [11]) distinguished Tanton for the following cumulative reasons:

“First, the appellants in our case could not simply choose not to attend or not to work in person. Only if the 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 substitutes direct.”

The Tribunal concluded that the tribunal below had erred in law in concluding that Tanton drove it to the conclusion it reached. The case was remitted to be reheard.

99 In his judgment, Lindsay J emphasised that the clause in issue in Tanton was “extreme”. Some power to delegate did not of itself prevent a contract being a contract of service. But it was a question of fact in that case and the tribunal had not decided on the facts.

100 The tribunal takes from this the importance of deciding the actual extent of the substitution clause in the Conditions, and the way in which it operated. It finds that there was a contract between WW and the replacement Leader for taking a meeting. The role of the usual Leader in nominating the replacement Leader to take the meeting was in acting in accordance with a procedure approved by WW and not by way of delegating her own position as usual Leader of the meeting. In making this finding, the tribunal takes into account the following factors in particular. First, the usual Leader had no rights in any sense of the word to remain Leader of the meeting. It was not in that sense “her” meeting. It was a WW meeting. She could be replaced as Leader of that meeting at any time by WW without notice. Indeed, she could both herself terminate the Agreement at any time and have her retention as Leader of that or any meeting ended by WW at any time. Alternatively, WW could end the meeting at any time without the Leader having any say in the matter. Second, the usual Leader was not at liberty to nominate anyone of her own choice to take the meeting. The replacement Leader was expected to be another Leader. Third, the usual Leader received no consideration of any kind in respect of a meeting that she decided not to take. The replacement Leader received payment from the proceeds collected from each member. Fourth, the tribunal heard nothing about sales of stock at a meeting. It was not told if it was the stock held by the usual Leader or the stock that was held by the replacement Leader that would be sold, nor who would be entitled to the commission on the sales.

101 The true position about replacement Leaders and this clause, the tribunal finds, is that there is no contract for the meeting between WW and the usual Leader. Nor was the tribunal given any evidence of contracts between the usual Leader and the replacement Leader. There was no pattern of offer, acceptance, and consideration in either case. There are contracts directly between WW and the replacement Leaders. If not before, then the acceptance of the contract by WW comes at the latest when WW ratifies the deduction by the replacement Leader of her fees from the proceeds of the meeting and thereby confirms the cash consideration received directly by the replacement Leader at the time of the meeting. The tribunal finds that it is clearly understood by all concerned that the replacement Leader is entitled to retain those fees as Leader in the same way that the usual Leader would have been entitled had she taken the meeting. The replacement Leader receives from WW the full fee payable for the meeting and the usual Leader receives nothing.

102 Two consequences follow from these findings. First, clause 10 cannot be interpreted as a right by the usual Leader to delegate. She has no right to anything in respect of a meeting if she is not personally the Leader of the meeting. If a Leader does not provide her personal services in respect of the meeting, she is not paid by WW and has no right to payment. There is no contractual right at all. The second is that the true analysis of the contractual relationship between WW and Leaders must allow for contracts to be meeting-specific. This suggests most naturally that the Conditions are, or are part of, an umbrella or framework agreement applied to specific meetings by a specific contract for that meeting or that series of meetings.

103 The most unusual clause in the Conditions is clause 15. The leader must at all times maintain her appropriate weight. That is to be read, in the view of the tribunal, with clause 6 of the Agreement, requiring her to use her best endeavours to attend meetings to be assisted in maintaining her goal weight. By way of background, the tribunal notes the agreed fact that Leaders are normally recruited from Gold members who had reached and stayed within their goal weights for five weeks. While reaching that weight is an implied condition for appointment as a Leader, continuing to maintain it in the long term is a significant limit on the personal life of any Leader. While the tribunal accepts that Leaders are recruited from successful members, and will be selected as Leaders because of their own interest in having lost weight and maintaining a lower weight, this is established not only as a requirement that the Leader maintain her weight, but also that she subjects herself to regular monitoring by WW to ensure that this is the case. That is an obligation that cannot be regarded as merely aspirational.

One contract or more?

104 This analysis gives rise to a series of subsidiary issues within the overall question of identifying the contractual relationship between WW and a Leader. Is the relationship a single relationship or more than one? Are the key documents identified by Mr Peacock QC definitive of that relationship (or those relationships) or is this a case where the tribunal must look to other documents and to a course of dealing as well? Are those documents genuine, or are the clauses set out above of the kind that fall foul of the warning given by Smith LJ, endorsing Elias J, in Protectacoat:

“The concern to which tribunals must be alive is that armies of lawyers will simply place substitution clauses or clauses denying any obligation to accept or provide work in employment contracts as a matter of form, even where such terms do not begin to reflect the real relationship”.

105 In considering this question, the tribunal was assisted by the evidence given by the individual appellants and the Main Appellant’s employees. This evidence assisted the tribunal by giving it information about how the relationship between a Leader and WW was seen by each witness. It also assisted by evidence of the extent to which the documents put forward by Mr Peacock QC were in practice definitive of the relationship between WW and Leaders.

The witness evidence

106 One practical starting point was the evidence about the relationship between WW and the ASMs. It is not in dispute that this was an employment relationship. Terms and conditions were set out in a detailed Employee Handbook. It consisted of 75 pages. The employment policies form the larger part of this booklet. As applied to ASMs it shows an open approach to some of the controls and limitations common to employment contracts. For example, ASMs work from home. They do not have an office unless they themselves designate part of their own homes as that office. If they do, they do not receive specific payments for that office. They do not have fixed hours. The booklet suggests a core hours system “requiring all staff to be present during these hours at their location of work” (page 46). The evidence was that this did not apply to ASMs in practice. Rather, they were expected to work a full week, though not at any particular location or time. As meetings frequently take place in the evenings or on weekends, an ASM visiting that meeting must adjust her hours accordingly. By contrast, the tribunal was given detailed evidence of the targets that ASMs were set both personally and in respect of each Leader. They are not mentioned in the Employee Handbook.

107 The picture, in general terms, was of a contractual relationship between WW and ASMs that at one level was relaxed and supportive but at another was target driven. The tribunal finds that the main means of control over an ASM is by way of regular appraisal of her performance against the key targets set for her and for the Leaders for whom she has responsibility. This was somewhat removed from the image of a contract of employment being a requirement that someone attend a specific place at a specific time for a specific number of hours to perform a specific range of duties.

108 The tribunal accepts the evidence that the relationship between WW and a Leader is not target driven in the same way as that with an ASM. It accepts the evidence that ASMs do not communicate targets directly to Leaders. Nor does WW. WW does require detailed weekly returns from every Leader in respect of every meeting and all stock sales. This includes not only the cash received but the attendance of members and the success of those members in moving towards their Goal weights. It measures each of these in detail against its key targets. It is left for a less formal conversation between an ASM and a Leader to deal with the strengths and weaknesses of Leaders and of meetings indicated by those figures and those targets.

109 Aside from those issues, the tribunal finds that the oral evidence as a whole was of limited weight as compared with the framework constructed by the terms and conditions where the Agreement and Conditions set out clear provisions. But it established a number of areas of the activities of Leaders on which both documents were silent. The tribunal has already detailed the evidence about sales of stock by Leaders as one such area. Again, the tribunal has already commented on the need to organise weighing and recording members’ weights. Another that emerged from the evidence of the Leaders was a consistent view of their functions at meetings, with a considerable degree of uniformity in the structure within which the meetings were delivered. This featured aspects of a meeting that are not reflected in the Agreement and Conditions set out above. Another example is that the WW image was accepted as paramount, with standard publicity, images, and language being used. At the same time there was clear acceptance that while a Leader could personalise her style of delivery, it was required to be consistent with the WW Programme. As the tribunal observed during the hearing, that is much the same position as that of a school teacher teaching to a set syllabus. While the evidence showed that successful Leaders were given latitude over their activities, provided they delivered what was required as part of the Programme and the ASM could see that they were meeting the targets she was given for each Leader, it also showed that the power to end the relationship was used when WW felt it necessary because of failure to deliver. That reflects the restrictive view of the conditions about leading a meeting discussed above, and not the notional absolute discretion that a literal reading of the words in isolation might indicate.

110 The witness evidence also suggested that the Agreement and Conditions were not alone in defining the relationship between WW and a Leader. The tribunal turns first to the issue of the sales of products, on which both the Agreement and the Conditions were silent. It finds that leaders were expected to promote sales of WW products at all meetings, and were prevented from promoting any rival or other products. Leaders were expected to make their own arrangements for ordering, taking delivery of, handling, presenting, selling, storing, and where necessary returning, WW stock. They were required to account for all sales of stock in detail and within a day of the meeting at which the stock was sold.

111 The relevant provisions about this are to be found in the Leader Policy Booklet at pages 35 and 36. The guidance is in mandatory, not advisory, form:

“You should only promote WW products and services in your Meetings or those products where you have specific leaflets or samples provided by your ASM

Since we only sell products that we have tested and that we know help our Member lose weight, as a WW Leader you must not promote any other product or service in your meeting, or allow anyone else to either…

Storage

You should store your stock of products securely. Edible items must be stored in cool, airy conditions away from vermin. You must sell your stock in rotation so older items are sold first. … You must never sell any product that is past it’s sell by date.”

In the Trainee Leader Handbook at page 28 it is stated that:

“Selling products to help members lose weight is a vital part of our business and your RT will discuss how you can promote them in your meetings…”

112 In evidence, Mrs Stubbings stated that she did not like the word “vital” but agreed that it was an important part of the business, and that they are a very important and lucrative part of WW’s profitability. Mr Tolley put to her that there is nothing in the standard conditions about product sales. He also asked her whether she accepted that the passages set out in the previous paragraph were intended by WW to be contractual as between WW and Leaders. Mrs Stubbings agreed with that. She also confirmed that the stock was held by Leaders on sale or return terms and that a Leader received 10 per cent commission for this. But leaders had to sell at WW prices and could not discount. Nor could they sell or promote any rival product. Mrs Stubbings also accepted in evidence that Leaders are obliged to make an effort to try and sell WW products but are not obliged to push them. This statement was offered as an explanation of the statement in written evidence that Leaders are not obliged to promote WW products.

113 The tribunal finds from this evidence that the Agreement and the Conditions are not a complete account of the relationship between WW and Leaders, and are not seen as that either by WW or by Leaders. There are clear terms defining the relationship with regard to a duty to make an effort to sell WW products, a duty to handle stock properly and keep it secure in both the physical sense and the hygiene sense, a duty to sell only WW products at the terms set by WW, and a right to a 10 per cent commission for doing so. WW regard those as standard terms applying to all Leaders, and they are additional to those terms in the contractual documents. They are not merely aspirational. The sanction, if necessary, is termination of the contract.

114 The importance of this issue, in the view of the tribunal, is that this takes the obligation of a leader beyond the time spent in a meeting or, in the narrow sense, preparing for a meeting. She also has duties dealing with products, for which she is rewarded when stock is sold. It is clear from the individual sales targets for Leaders, and the actual sales by Leaders, that the tribunal was shown that those rewards can add materially to the receipts of a Leader as well as generating profits as described by Mrs Stubbings for WW.

115 Turning to other aspects of the WW relationship with Leaders, the tribunal finds that there are other points in the two Booklets that mandate rather aspire. For example, there is no definition of membership in the Agreement or Conditions. While the relationship of a member is between the members and WW, and a Leader is not a party to that contact, the Leader does earn a commission from signing a new member. But she may only do so within the categories of member allowed. For example, page 22 on the Leader Policy Booklet sets out details about age and weight restrictions on membership which it is clearly the duty of a Leader to enforce. If someone is outside the limits “you won’t be able to take them as a member”. Another example, put to several witnesses, was the requirement that all meeting monies should be banked within 24 hours of a meeting and that “you must make sure that you take all reasonable measures to ensure that the money is protected and safe during these 24 hours”. This is explained (at page 34 of the Leader Policy Booklet) as being necessary for insurance purposes as WW insures the money on those terms for 24 hours and no longer. Leaders who hold the money for longer must telephone WW to say why.

General conclusion

116 On the above findings, the general conclusion of the tribunal is as follows. It is not in dispute that there is mutuality between WW and Leaders, although there is dispute about the extent of that mutuality. The tribunal finds that a contractual relationship exists between WW and a Leader in two contexts: where the Leader personally takes a WW meeting and separately in relation to WW products held by the Leader for sale or return. There are contracts between WW and each Leader about both these matters.

117 The tribunal’s finding about personal service reflects its findings of fact and interpretation of the relevant conditions relating to the contended right of a Leader to find a replacement Leader if she does not take a particular meeting. WW pays only the Leader who takes the meeting. The Leader who does not take a meeting has no contractual rights as against WW in respect of that meeting. The Leader who does take the meeting does have those rights.

118 It follows that there must be a contract in place even for an individual meeting conducted by a Leader as a replacement Leader. This suggests that the relationship is one that might be best approached as that of specific contracts for acting as a Leader for a particular meeting or meetings to be read in the context of agreed general terms and conditions.

119 Those terms and conditions, and the contracts between WW and Leaders that incorporate them, are not limited only to the terms in the Agreement and Conditions. They include also certain parts of the two key handbooks for trainees and for Leaders. That is the clear understanding of both WW and of Leaders as illustrated by the oral evidence given to the tribunal.

120 The tribunal finds that, in addition to mutuality and a relationship involving personal service by a Leader, those terms and conditions impose important controls on any Leader when taking a meeting. Despite the opening phrase of clause 6 of the Conditions, a Leader does not have an unfettered discretion about the time, date, and place of any meetings. Despite the wording of clause 8 of the Conditions, a Leader does not have an absolute discretion about how to run a Meeting. Despite the impression given that clause 10 allows a Leader to find her own substitute for any meeting she does not wish to take, the true analysis is that there is then no contract between that Leader and WW for that meeting. The contract is with the replacement Leader. Only when a Leader performs the function of being a Leader personally does she get paid. Clause 12 stops a Leader from taking part in any rival weight control meetings. She cannot undertake work as a Leader for WW as part of a more general profession or business in personal weight management. Clause 14 includes an utmost good faith requirement. And clause 15, read with the Agreement, requires her not only to maintain her Goal weight but to be monitored in doing so by WW. The mandatory parts of the Booklets add other obligations.

121 What emerges from this analysis is a situation that the tribunal finds as fact to be one where WW has a considerable degree of control over every Leader to ensure that she delivers the WW Programme, and only the WW Programme, at every meeting and in her permanent weight maintenance, that she does not deliver any other weight management service at the same time and that she does not deliver either the WW Programme or any other weight management service for some time afterwards. This is a degree of control enforced by the power held by WW under the Agreement and Conditions to stop a Leader acting as a Leader permanently at any time without any reason being stated and to prevent a Leader gaining any enduring business advantage from her efforts as a Leader. This is strengthened by a power to prevent any particular Leader taking any particular meeting (or any repeat of that meeting) without notice to anyone, and by the fact that a Leader who does not take a meeting personally receives no payment for it.

122 Taking all these factors together, but putting particular weight on its analysis that a Leader must provide her personal service in running a meeting to gain any contractual advantage from WW, on the requirement that she deliver the WW Programme and only the WW Programme at a meeting, and on the control WW has over the existence of any meeting and who may be a member of that meeting, the tribunal finds that on balance the terms and conditions of the contractual relationship between WW and its Leaders are characteristic of contracts of service.

123 The tribunal therefore finds that HMRC’s regulation 80 determinations and section 8 decisions were correct and must therefore dismiss all the appeals.

JUDGE DAVID WILLIAMS

JUDGE MALACHY CORNWELL-KELLY

TRIBUNAL JUDGES

Issued: 2 February 2010

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (NIC) Respondents

Documents establishing the conditions applying to Weight Watchers Leaders

The witness evidence

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Weight Watchers (UK) Ltd & Ors v Revenue & Customs [2010] UKFTT 54 (TC) (02 February 2010) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00367.html Cite as: [2010] UKFTT 54 (TC), [2010] STI 1620