Partners should be protected by whistleblowing legislation

If you are a partner in a business and ?you blow the whistle to signal that a fellow partner is breaking the law, should you get protection from any recriminations that might arise from your partners as a result?

As the law stands at present, the answer is quite counterintuitive: no you shouldn’t. That is according to the Court of Appeal decision earlier this month in the case of Clyde & Co LLP v Van Winkelhof. In my view this decision exposes a flaw in the current laws regarding partnership and whistleblowing which may induce calls for a law change in the future.

Krista Bates van Winkelhof was fired shortly after alleging bribes were being paid to gain clients for the Tanzanian Law firm Azko Law, which represented the major international firm Clyde & Co where van Winkelhof was an LLP partner.

Jurisdictional questions aside – the case also considered whether van Winklehof had a right to bring a claim in the UK at all – had she been an employee or a “worker”, she would have had a potentially sizeable uncapped claim for unfair dismissal based on whistleblowing. She would have been protected under UK whistleblowing legislation. But as an LLP partner, the court decided, she was neither an employee nor a worker and was not protected under whistleblowing legislation.

At first glance this might seem reasonable. Partners are not typically considered as employees, or “workers” employed by others; rather, they are co-owners of the business and are considered “self-employed”. Van Winklehof earned something in the region of £200,000 a year. She had a right to profit share and was, to some extent, part of the leadership of the business. If she could bring a claim wouldn’t this mean she was effectively suing herself, as a co-owner of the business? Should she really have protection on blowing the whistle?

Backward step

In my view, these arguments are only superficially attractive and the decision is a backward step. In the age of the limited liability partnership, the concept of a handful of equity partners owning a business on more or less equal terms is less relevant than it was. Nowadays partners come in all different shapes and forms, with huge variations in equity and pay structures.

Many LLPs have countless “LLP members or partners” some of whom have no control over the running of the business or the decisions made at the top table. Many LLP members have none of the power or influence that you would expect of a partner in the traditional sense. Although there are advantages to being a partner (the firm has to pay less national insurance for example) many lower-ranked partners are simultaneously disadvantaged by lacking both clout at their firm and proper employment rights.

Admittedly Van Winklehof was a partner of more genuine standing, but the judgment rested on a principle going back to the 1890 Partnership Act.

Some might say that an Act devised in 1890 is not fit to deal with the myriad of new business situations before us. If a judge really has to refer back to 1890, is it not perhaps time to re-examine the law? In any event, at a gut level it ?seems daft, at least to me, that somebody should need to claim they are really an ?employee in order to get any protection for making a whistleblowing claim in the ?workplace.

Anti-discrimination principles

Would it not be better and simpler if all partners and employees had the same rights to blow the whistle? After all, they have clear rights to claim they are the victims of discrimination by other partners.

Often it takes a senior person to have the wherewithal and courage to blow the whistle. This decision has taken the protection available to those persons away

New rules could be introduced, similar ?to those rules incorporating prohibition against unlawful discrimination against partners in the Equality Act 2010, incorporating rights permitting partners to pursue claims when making a public interest disclosure and offering protection from subjecting partners to detriments or expulsion for raising the ?disclosure.

Potential issues may arise concerning more traditional partnerships. Section 12 of the Partnership Act 1890 makes partners jointly liable with their co-partners for any wrongdoing, which may cause concern that any disclosure and subsequent penalties would impact them personally.

Provisions to prevent abuse already exist under the Employment Rights Act 1996, the Public Interest Disclosure Act 1998 and under common law.

However, clear and effective employer whistleblowing policies setting out clearly the protection afforded to whistleblowers would be desirable to provide the appropriate support and guidance. Time for a 2012 Partnership Act maybe?