Partner or employee?

The much-anticipated decision in Tiffin has provided clarity as to when a fixed-share partner is a genuine partner, without statutory employment rights.

Mr Tiffin was a fixed-share partner in the firm Lester Aldridge, pursuant to a members' agreement. Notwithstanding this agreement, he pursued claims for unfair dismissal after he left the firm. He was unsuccessful at the employment tribunal and employment appeal tribunal (both of which determined that they had no jurisdiction to hear his complaint as he was not an employee). He took his case to the Court of Appeal on an important point of principle, with potentially huge ramifications for the legal world.

Tiffin's case was given short shrift by the Court of Appeal. He had argued that he was not a genuine partner as he was not fully involved in the management of the firm, his share of profits was too small in contrast to full-equity partners and the label of 'fixed share' was not sufficient evidence of his status. The Court of Appeal rebutted these arguments: it stated that at no point had Tiffin argued that the partnership agreement was a sham and the documents clearly show that the relationship was intended to be that of a partner and not an employee. Further, there is no minimum threshold required for involvement in managerial matters or amount of profit share.

Although LLPs will no doubt be breathing a sigh of relief, this case does not mean that all fixed-share partners will be genuine partners. Each case is fact specific. A big factor in Tiffin's case before the Court of Appeal was that his appeal could only have been successful if there had been a genuine error of law in the lower court (and the decision was perverse). No such error was found by the Court of Appeal.

Further, genuine partners still retain statutory discrimination protections. This is often where the bigger claims lie, as, unlike unfair dismissal, there is no cap on the compensation that can be awarded. While this case is a useful reminder of the principles surrounding partner status, partnerships should not assume it now gives them free license in their treatment of fixed-share partners.

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