The Supreme Court has held that a former equity partner of a law firm was a worker for the purposes of the Employment Rights Act and could therefore bring a claim for whistleblowing. The decision means that LLP members may benefit not only from whistleblowing protection but also a range of other rights available to workers, including working time rights and the right to be auto-enrolled into a pension scheme. Clyde & Co LLP v Winklehof The Claimant, Ms Bates van Winklehof, was an equity partner at Clyde & Co (C&C). She was seconded to a Tanzanian law firm, by whom she was employed. She reported to C&C’s management that the managing director of the Tanzanian firm had admitted paying bribes to secure work and judicial outcomes. She was subsequently expelled from the partnership and claimed, amongst other things, that she had suffered a detriment as a worker because she had made a protected disclosure under the Employment Rights Act (“ERA”). At a preliminary hearing, the Tribunal held that she was not a worker as defined by the ERA and was therefore ineligible to bring a whistleblowing claim. The Court of Appeal upheld the Tribunal’s decision. She appealed to the Supreme Court. Decision The Supreme Court overturned the Court of Appeal’s decision. It clarified that LLP members can be workers and that, taking into account all the circumstances, Mrs Bates van Winkelhof was a worker and therefore entitled to bring a whistleblowing claim. The Court disagreed with the Court of Appeal’s decision that the Limited Liability Partnership Act 2000 meant that an LLP member can never be a worker. The question depends on the ERA, which defines a worker as an individual who works under a contract of employment or “any other contract…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 undertaking carried on by the individual.” There is a distinction between self employed people who carry on a profession or business undertaking on their own account and enter into contracts with clients or customers to provide work or services for them (who are not “workers”) and those who provide their services as part of a profession or business undertaking carried on by someone else (who are workers). Applying the definition in the ERA, the Court found that Ms Bates Van Winklehof was a worker, for the following reasons: ● she could not market her legal services to anyone other than the LLP; ● she was obliged to perform services for the LLP personally; ● she was an integral part of the business; and ● the LLP was not her client or customer. The Court disagreed with the finding of the Court of Appeal that subordination is an essential element in a worker-employer relationship, noting that the statutory definition contains no such requirement. It held that, while subordination can be useful for distinguishing workers from self-employed people, it is by no means a universal characteristic of being a worker. Comment The decision does not mean that all LLP members are automatically protected as workers, but in practice, most LLP members will be in a similar position to Mrs Bates Van Winklehof, which means that partners who expose malpractice in their own firm may now benefit from all the protections afforded to workers who make protected disclosures. Employer LLPs should therefore consider reviewing their training and internal policies on whistleblowing to ensure that they apply equally to LLP members as well as employees. Furthermore, since the definition of “worker” in the ERA is very similar to that in other employment legislation, members of LLPs are also likely to be eligible to benefit from other worker rights, including the right to paid annual leave, protection against unlawful deductions from wages, limits on working time and protection from less favourable treatment if they work part-time. Significantly, the Pensions Regulator has also confirmed that the decision is relevant when considering whether LLP members are “workers” for the purposes of the Pensions Act 2008. It follows that LLPs may have to automatically enrol their members into a pension scheme, and incur the additional financial liability of funding minimum levels of pension contributions, unless the members opt-out. Finally, while the Supreme Court limited the scope of its judgement to LLP members, the analysis would suggest that partners in “traditional” general partnerships can also qualify for worker status. The Court also left open the argument that (contrary to the orthodox view) partnership and employment status are not necessarily mutually exclusive, an area where we may see further litigation in the future
Charles Thomson is a partner and solicitor advocate in Baker McKenzie’s Dispute Resolution Practice Group in London. He co-manages the Business Crime Unit, and is part of the Financial Institutions Disputes, Contentious Trusts and Compliance and Investigations Groups. Charles joined the Firm as a trainee in 2002, and concurrently spent three months on secondment as a judicial assistant at the Royal Courts of Justice in the Civil Appeals Division. A solicitor advocate since 2007, Charles appears as an advocate in all Higher Courts in England and Wales. Chambers and Legal 500 both commend Charles for his legal practice. Charles is also listed as a Rising Star in Litigation by Legal Week.