It is well known that a partner may, in some circumstances, in fact be an employee and enjoy the rights that employee status brings (see our report on Tiffin v Lester Aldridge). What is far less well understood is that the law draws a further distinction, between those who are ‘workers’ and those who are not. Some rights which many associate with employee status, are in fact based on whether the individual is a ‘worker’. These include the national minimum wage, paid sick leave, restrictions on working time and protection for part-time workers and for whistle blowers.
Although a true partner cannot simultaneously be an employee, a partner can be both a partner and a worker. A recent example of this can be found in the case of Bates van Winkelhof v Clyde & Co LLP , which concerned a partner who brought a whistleblowing claim against her former firm. This case is believed to be the first appellate decision on whether an equity partner can be a worker.
In Bates van Winkelhof v Clyde & Co LLP, the equity partner claimed that she was expelled by her firm after she had raised her suspicions of wrongdoing at a joint venture partner. Initially, an Employment Tribunal decided that it did not have jurisdiction to hear her whistleblowing claim because she was not a worker. It instead decided that the Claimant was in business in her own right because she received a share of profits in relation to the work carried out and so fell outside the definition.
On appeal, the Employment Appeal Tribunal (EAT) analysed the Claimant’s working arrangements against the criteria for worker status, namely:
- the individual works under a contract (whether express or implied);
- the individual undertakes to perform work or services personally;
- the work or services are to be performed for another party to the contract; and
- the other party is not a client or customer of any professional business undertaking carried on by the individual.
Whereas the Employment Tribunal decided that the fourth limb of this test applied to the Claimant (and therefore she could not be a worker), the EAT considered that the fourth limb did not apply and that Clyde & Co was not the Claimant’s customer. Factors which influenced its decision were that Ms Bates van Winkelhof:
- was not solely remunerated on a profit share basis;
- was in a subordinate position to Clyde & Co;
- was an integral part of the firm’s organisation; and
- agreed to devote her full time and attention to Clyde & Co’s business (and was therefore precluded from offering her services to anyone else).
What does this mean for partners and partnerships?
What was true for Ms Bates van Winkelhof is almost certainly true for many partners in City law firms.
In much the same way as the recent Tiffin v Lester Aldridge case does not confirm that partners cannot be employees, the Bates van Winkelhof case does not necessarily mean that partners will always be workers. However, a large numbers of partners can now be confident that they have gained additional protection if they are engaged on similar terms to Bates van Winkelhof. Where whistle blowing or part-time worker claims are brought or contemplated, a careful analysis of the working arrangements will be necessary to determine the partner’s “worker” status. For example, if a partner is remunerated solely by profits on an “eat what you kill” basis, then there might be greater scope for arguing that they are not workers and cannot pursue whistle blowing claims.