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Employment Status-Partner in limited liability partnership was a worker and entitled to whistleblowing protection.

In Clyde and Co LLP and anor v Bates van Winkelhof (2014) UKSC 32, the majority of the Supreme Court held that a junior equity partner in a limited liability partnership (LLP) was a ‘worker’ within the meaning of s.230 (3) (b) of the Employment Rights Act 1996 (ERA) and was therefore able to pursue a whistleblowing claim.

Overturning the decision of the Court of Appeal, the court found that the LLP member fell within the definition of worker in section 230 (3) of the Employment Rights Act 1996, as she could not market her services as a solicitor to anyone other than the LLP and was an integral part of its business. It was not necessary for there to be an element of subordination in order for worker status to be made out. While subordination may sometimes be an aid to distinguishing workers from other self-employed individuals, it is not a universal characteristic of being a worker.

The facts of the case are that Ms Bates van Winkelhof became an equity partner of Clyde & Co LLP in February 2010, a London based law firm organised as a LLP, after it bought the firm at which Ms Bates van Winkelhof was on secondment in Tanzania.

In November 2010, Ms Bates van Winkelhof reported to Clyde & Co that the managing director in Tanzania had told her that he had paid bribes to secure work and a favourable outcome to cases. Her secondment was ended and she was expelled from Clyde & Co’s partnership in January 2011.

Ms Bates van Winkelhof lodged among other things, a whistleblowing claim, on the basis that she had suffered a detriment contrary to s.47B ERA as a result of her ‘protected disclosure’ of reporting the bribes.

An employment tribunal held that it did not have jurisdiction to consider Ms Bates van Winkelhof’s whistleblowing claim on the grounds that she was not a worker. They held that although she worked under a contract to do or perform personally work of services for the LLP, because she was “in business in her own right, receiving a share of the profits in relation to the work carried out.”

In the Employment Appeal Tribunal, Judge Peter Clark allowed her appeal and held that she was a worker. She was an integral part of the LLP’s business, she could not offer her services to anyone else, she was in a subordinate position and the LLP was not her client.

The LLP’s appeal to the Court of Appeal was successful. Clyde and Co argued that the EAT had erred because:

  • It had focused solely on the fact that Ms Bates van Winkelhof had agreed to devote her time and attention to the business of the LLP and not to work for anyone else. It should have looked at other factors which demonstrated that, as an equity member, she was able to take an active part in the running of the partnership, which was at odds with the idea that this was a subordinate relationship.
  • Further, she could not be a worker because of the effect of section 4 (4) of the LLPA 2000. She would have been neither an employee nor a worker if the firm had been a general partnership under the PA 1890.

The Court of Appeal allowed the appeal against the EAT’s decision on worker status, finding that Ms Bates van Winkelhof was not a worker. It held that the effect of section 4 (4) of the LLPA was that an LLP member who would have been a partner in a general partnership could not be an employee or a worker. The Court of Appeal considered that there was no doubt that Mrs Bates van Winkelhof would have been a partner if the LLP were a partnership. It accepted that the phrase ‘employed by’ in s.4 (4) embraced both ‘employees’ and ‘worker’ status and so Mrs Bates van Winkelhof could only bring her claim as ‘worker’ if she would have been a ‘worker’ in a traditional partnership.

Although there was no case law on whether a partner in a traditional partnership could be a worker in the ERA 1996 sense, the court relied on authorities showing that the nature of a partnership is inconsistent with the status of an employee. The reasoning in these cases provided “no rational basis” for distinguishing between employee and workers.

Ms Bates van Winkelhof appealed to the Supreme Court arguing that:

  • She was employed under a contract personally to perform work or services for the LLP; she was an integral part of their business and the LLP was not her client or customer.
  • There was no additional element of subordination required in the concept of employment, but if there was, she was subordinate for their purpose.
  • Section 4 (4) of the LLPA 2000 did not modify the ERA 1996 in respect of worker status, but even if it did, she would have been a worker in a partnership (and so could be employed as a worker by the LLP, while remaining a member of it).
  • Her right to freedom of expression under article 10 of the ECHR required the ERA 1996 to be construed purposively, so as to afford her effective protection for her rights.

The Supreme Court (Lady Hale giving the leading judgement) unanimously allowed the appeal, holding that Ms Bates van Winkelhof was a worker, for the purposes of the ERA 1996. As such, she was entitled to the protection of the whistleblowing provisions. The case will now proceed in the employment tribunal.

Overturning the decision of the Court of Appeal, the court found that the LLP member fell within the definition of worker in section 230 (3) of the Employment Rights Act 1996, as she could not market her services as a solicitor to anyone other than the LLP and was an integral part of its business. It was not necessary for there to be an element of subordination in order for worker status to be made out. While subordination may sometimes be an aid to distinguishing workers from other self-employed individuals, it is not a universal characteristic of being a worker.

The Supreme Court’s decision is significant as it means that LLP members will benefit not only from the statutory protection from detriment available to whistleblowers, but also from a range of other rights available to workers. These include the right to paid annual leave and the right to be auto-enrolled in a pension scheme.

James Haley, Solicitor at Just Employment Solicitors

James Haley, Solicitor & Director, Just Employment Ltd.

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