LLP Members Qualify for Worker Rights

The Supreme Court has ruled that LLP members can be workers, meaning that they qualify for a range of worker rights and protections. 

In Bates van Winkelhof v Clyde & Co LLP, B was an equity member of Clyde & Co LLP. She was expelled from the partnership after she reported to Clyde & Co that the managing director of the Tanzanian firm to which she was seconded had paid bribes to secure work. She alleged that her expulsion was due to her having made a protected disclosure and that this amounted to detrimental treatment on whistleblowing grounds. These claims are denied by Clyde & Co and have not yet been tried. 

Clyde & Co argued that B was not a worker and could not therefore bring a whistleblowing claim. After conflicting decisions on this issue from the Employment Tribunal, Employment Appeal Tribunal and Court of Appeal, the Supreme Court has ruled that B was a worker and could therefore benefit from whistleblowing protection.

In order to show that she was a worker, B needed to show that she was employed under a contract which required her personally to perform work or services for Clyde & Co and that Clyde & Co was not a customer or client of a business carried on by her (s230 Employment Rights Act 1996 (“ERA”)).   By the time the case reached the Supreme Court, the parties accepted that this was the case. However, there was disagreement on two issues:

• whether an essential element of worker status is that one party is subordinate to the other; and
• the effect of the Limited Liability Partnership Act 2000 ("the LLP Act), which the Court of Appeal ruled precluded an LLP member from being a worker, if they would have been a partner had the LLP been a traditional partnership (rather than an LLP). 

The Supreme Court disagreed with the Court of Appeal’s view on the effect of the LLP Act and ruled that it has no bearing on the statutory definition of worker in s230 ERA. It also ruled that it is not necessary for one party to be subordinate to the other in order for worker status to be established. Instead the words of the statute should be applied to the facts of each case.

B could not market her services as a solicitor to anyone other than Clyde & Co and was an integral part of its business. Clyde & Co were in no sense her client or customer. She therefore fell squarely within the wording of s230. It is necessary to distinguish between self-employed people who are in business on their own account and undertake work for clients or customers (who will not be workers) and those who provide their services as part of a profession or business carried on by someone else (who may be workers, depending on the facts of each case).

This decision gives LLP members protection from retaliation by their firm in response to the member making a protected disclosure about a legal or regulatory wrongdoing. Retaliation could include a demotion or compulsory retirement. An LLP member, if successful in a whistleblowing claim, will be entitled to both uncapped compensation based on their future losses and also an award for injury to feelings.

The Supreme Court’s decision has wide-ranging implications as it is not just whistleblowing protection which will potentially be available to LLP Members. They may also qualify for a whole range of other rights and protections, including the right to paid holiday, working time rights, part-time worker rights and the right not to suffer unauthorised deductions from wages. LLPs will need to ensure that they treat their members in accordance with these rights and that whistleblowing, holiday and other policies as appropriate are amended to reflect the fact that they apply to LLP members. 

While LLP members do not have the same legal protection as employees (such as the right to claim unfair dismissal) they do now have the range of protections given to workers against certain types of unlawful treatment by their firms and will be able to bring employment tribunal claims to enforce them.  In addition, they are protected against unlawful discrimination as the Equality Act 2010 extends to discrimination against partners and LLP members.