29 May 2014

In an important decision for Limited Liability Partnerships (LLPs) and members of LLPs, the Supreme Court has ruled that a member of an LLP is a 'worker' and therefore entitled to whistleblowing protection. The same may be true for partners in general partnerships, but their status remains unclear.

The Supreme Court in the case of Clyde & Co LLP and another v Bates van Winkelhof held that a former fixed-share equity partner of an LLP was a 'worker' for the purposes of the Employment Rights Act and therefore she was entitled to proceed with her whistleblowing claim.

A worker is defined as an individual who has entered into or works (or worked) under:

  • a contract of employment; or
  • any other contract to do or perform personally any work or services for another party (providing that party is not a client or customer of a professional or business undertaking of the individual).

The Supreme Court held that Ms Bates van Winkelhof was a worker because:

  • she could not market her services as a solicitor to anyone other than the LLP
  • she was an integral part of the LLP's business; and
  • the LLP was not her client or customer.

This decision overturns the Court of Appeal's decision that Ms Bates van Winkelhof was not a worker due to its interpretation of section 4(4) of the Limited Liability Partnerships Act 2000 and a lack of subordination between a member of the LLP and her fellow members.  

The Supreme Court decided that section 4(4) does not mean that members of an LLP can only be 'workers' within the meaning of the Employment Rights Act if they would also have been 'workers' had they been partners in a traditional partnership and rejected the idea that underlying the statutory definition of 'worker' is the notion that a worker must be 'subordinate' to another party.

The Supreme Court highlighted that the law distinguished between self-employed people in business on their own account who contract with customers or clients and those who provide their services as part of a profession. It held that, depending on individual circumstances, worker protections could apply to the latter category. Therefore, many firms of solicitors, accountants and doctors, that are LLPs, will need to take note of this decision.  

Baroness Hale, giving the leading judgment, made the point that the decision of the Supreme Court is entirely consistent with the policy of the whistleblowing legislation, 'which some might think particularly applicable to businesses and professions operating within the tightly regulated fields of financial and legal services.'

In addition to whistleblowing protection, the decision means that LLP members may benefit from other statutory employment rights and protections available to workers. Importantly LLPs will need to obtain advice about their obligation to enrol members into a qualifying pension scheme for the purposes of the automatic enrolment legislation, which defines 'worker' in a very similar way.

Practical implications for LLP members

  • Members of an LLP may now be protected under the whistleblowing legislation from being subjected to any detriment on the ground that they have made a protected disclosure and any dismissal could be found to be automatically unfair if the principal reason for the dismissal is the protected disclosure, giving an entitlement to uncapped compensation, together with an award for injury to feelings.
  • LLP members may now benefit from a number of other rights enjoyed by workers including the right to paid annual leave, limits on working time, pension auto-enrolment, and the right not to be treated less favourably because of part-time status.

Practical implications for LLPs

  • LLPs should review whistleblowing policies to ensure that they apply to LLP members.
  • LLPs should review their LLP agreements and working conditions that apply to their members to ensure compliance with the statutory rights and protection for workers.
  • LLPs should obtain advice regarding compliance with the obligation to enrol members into a qualifying pension scheme under the auto-enrolment legislation.

Although this landmark decision clarifies the position in relation to whether a LLP member can be a worker, it leaves open the question of whether a partner in a traditional partnership could be an employee or worker of their firm and by extension whether he or she could be covered by the whistleblowing protections. This question, for the moment, remains unresolved.

If you would like more information, or specific advice, on the impact of this case, please contact Roger Bull.

Key contact

Roger Bull

Roger Bull Managing Partner

  • Managing Partner 
  • Employment Disputes
  • Strategic HR Projects

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