Case update (3): Limited liability partnerships (LLPS) – members are workers

whistle-blowing

Summary: Can a member of a limited liability partnership (LLP) also be a ‘worker’ so as to qualify for the legal protection afforded to whistleblowers?

Yes says the Supreme Court in Clyde & Co LLP and another v Bates van Winkelhof available here.

Facts: Ms Bates van Winkelhof, the claimant, was a partner at Clyde and Co LLP, a law firm. In the claimant’sLLP agreement with Clyde and Co she was required to devote her full time and attention to Clyde and Co’s business. The claimant was also seconded to, and had an employment contract with, a Tanzanian law firm (as such a contract was necessary to permit her to work in Tanzania).

The claimant reported to Clyde & Co that the managing partner of the Tanzanian firm had admitted to paying bribes in order to secure work and the outcome of cases. These allegations are denied by Clyde & Co. Not long after, the Tanzanian law firm dismissed the employee. Clyde and Co later expelled the employee from the Clyde & Co Partnership. The employee claimed that her expulsion was a detriment on the grounds that she had made a protected disclosure.

The initial question was whether the claimant was entitled to bring a claim under whistleblowing legislation as in order to do so she would need to be a ‘worker’. The legislation defines a “worker” as someone employed under a contract where the individual undertakes to do or perform personally any work or services for the other party to the contract provided the other party is not a client or customer of any profession or business undertaking carried on by the individual.

The question of whether the claimant was a worker was clearly not straightforward; the Tribunal and the Court of Appeal considered that she was not, by contrast the EAT and the Supreme Court considered that the employee was a worker.

The Supreme Court held that the employee was a ‘worker’. This was on the basis that the claimant was not a professional or business undertaking specifically marketing her services as an independent person to the world in general. This is because the LLP agreement prevented her from offering her professional services to anyone but Clyde & Co. Instead, the claimant’s work was an integral part of Clyde and Co – they were in no sense her client or customer and she was held out as part of that business. Therefore the employee was a worker for the purposes of pursuing a whistleblowing detriment claim.

Implications: The ruling has important implications for law firms and other professional partnerships, in particular in the financial and legal services sectors. Although the Supreme Court stopped short of finding that partners of an LLP were employees (and so will not be able to claim, for example, unfair dismissal) they will be protected against any detriment imposed on them as a result of making a protected disclosure. There is no cap on the compensation that may be awarded where such claims are made out and therefore the decision may provide members with a valuable bargaining chip during contentious exit negotiations.

Further, as the definition of “worker” used in the whistleblowing legislation is identical or very similar to that used in various other pieces of legislation, this decision means that the protection afforded to members of an LLP is wider than had previously been understood. In particular the decision means that members of an LLP are potentially caught by, for example:

  • auto-enrolment: In the case of salaried partners, this may mean that they should be automatically enrolled into a qualifying pension plan. In the case of equity partners, it could be argued that no “qualifying earnings” are payable in respect of them, and therefore that they should be categorised as “entitled workers”, to whom relatively low level duties are owed under the legislation concerning auto-enrolment.
  • minimum wage legislation: although this is not likely to be an issue in most cases;
  • less favourable treatment associated with part-time status;
  • unauthorised deductions from wages; and
  • Working Time Regulations: including limits on working hours, rest-breaks, and the right to paid annual leave.

In practical terms LLPs should now:

  • review, extend and amend their whistleblowing policies to ensure that it they make it clear that members can “blow the whistle” without fear of retaliation (in the same way as employees) and consider what training may be appropriate;
  • check that discrimination and harassment policies also protect members; and
  • consider whether members should be auto-enrolled into the LLP’s qualifying pension plan, or whether some lesser duties are owed to them under the auto-enrolment legislation.