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Whistleblowing partners not protected in the UK

Court of Appeal rules that fixed-share partners in LLPs are not ‘workers’

27 September 2012

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By Manju Manglani, Editor (@ManjuManglani)

The Court of Appeal ruled yesterday that members of limited liability partnerships (LLPs) cannot obtain protection as ‘workers’ under certain employment legislation.

In Clyde & Co LLP and another v Bates van Winklehof [2012] EWCA Civ 1207, it held that fixed-share partners cannot be treated as workers and therefore are not protected as whistleblowers under Section 47B of the Employment Rights Act 1996.

Krista Bates Van Winklehof claimed that she had been expelled as a member of Clyde & Co because she had made claims of wrongdoing against the managing partner of Ako Law, a connected law firm.

Overturning the Employment Appeal Tribunal’s controversial decision that Bates van Winklehof could be considered a worker, the Court of Appeal said that members of LLPs who would have been partners if they were in unlimited partnerships could not be considered to be workers either.

Commenting on the ruling, Fergus Payne, joint head of partnership & LLP at Lewis Silkin, said: “This decision means that partners and LLP members, amongst other things:

  • are not protected in the event they ‘blow the whistle’;

  • cannot complain about less favourable treatment associated with working part time;

  • are not covered by the Working Time Regulations – so there are no limits on their working hours and they have no right to rest breaks or paid annual leave; and

  • are not entitled to receive national minimum wage (although this is highly unlikely to be relevant in practice).”

“In addition, partners and LLP members will not fall within new laws coming into force on 1 October 2012 that will eventually require all employers in the UK to automatically enrol eligible ‘workers’ in a pension scheme and make contributions in respect of them,” he added.

In another recent case, Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35, the Court of Appeal had held that fixed-share partners in LLPs are not ‘employees’.

“This means, for example, that partners and LLP members typically: cannot claim unfair dismissal or statutory redundancy pay; have no entitlement to statutory minimum notice periods; are not protected under TUPE when there is a transfer of an undertaking; and do not benefit from statutory sick pay or various family rights such as maternity leave,” said Payne.

“It is, however, important to remember that all partners and LLP members have specific protection against unlawful discrimination under the Equality Act 2010.”

Added Tina Williams, senior partner at Fox Williams: "It will now be difficult for partners in general partnerships and LLPs to claim that they have protection as 'workers'. 

"The Court of Appeal was not prepared to find that the partner in this case was a worker, but on a different set of facts this might be possible. A court would be more likely to hold that partners who have minimal involvement in the running of the firm or whose remuneration is not linked to the firm's profitability have protection as employees or workers.

"Firms ought to review the different categories of partners they may have (salaried, fixed share, full equity) to assess whether they might have protection as employees or workers. It is crucial to understand what rights partners have when considering asking them to leave. Unfortunate litigation may result from ignoring a partner's existing rights."

The case

The case involved a claim by Bates Van Winklehof, a member of Clyde & Co LLP who received a fixed share of profits, as well as an additional percentage.

The source of her complaints is that, on 23 November 2010, she reported that the managing partner of Ako Law, a connected firm in Tanzania, had been involved in money laundering and had paid bribes both to secure work and to affect the outcome of cases, the ruling said.

She was dismissed by Ako Law on 25 November and suspended by Clyde & Co the following day. An investigation culminated in her being expelled as a member of Clyde & Co on 13 January 2011.

She subsequently brought a whistleblowing complaint against Clyde & Co under Section 47B of the Employment Rights Act 1996, alleging that she had been expelled as a member because she had made protected disclosures regarding the managing partner of Ako Law.

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