LLP Member cannot pursue a whistle blowing claim.

October 10, 2012

The Court of Appeal yesterday handed down its judgment in Clyde & Co v Bates van Winkelhof in which it was decided that a true partner cannot also be a worker and cannot, therefore, bring a whistle blowing claim. This follows just a few months on from the same Court’s decision in Tiffin v Lester Aldridge that a fixed share partner was not an employee and could not claim unfair dismissal (see our report on Tiffin v Lester Aldridge).

These decisions are key for professional partnerships because employees and workers have certain rights which are not available to a true partner. The distinction between workers and employees is an important one: all employees are workers, but not all workers are employees. Many employment rights conferred on employees are not available to workers or to partners, such as the right not to be unfairly dismissed. Workers are able to pursue certain claims such as whistle blowing and in respect of the minimum wage and working hours, whereas a true partner is not. True partners have much more limited protection, but they can bring claims for discrimination under the Equality Act 2010.

The Clyde & Co and Lester Aldridge cases suggest that any partner or member who is involved in the management of the firm, shares in its profits and is bound by the acts of other partners gains neither employee nor worker status. However, there remains the risk that salaried partners who are partner in name and little else (e.g. those who become members of an LLP merely for the title or for the saving of National Insurance contributions) will continue to enjoy enhanced employment rights.

Whilst this might seem like a positive step for professional partnerships, the City has lost a powerful compliance tool for ensuring that high professional standards are maintained. The protection afforded to whistle blowers helps to ensure that businesses are run in accordance with the law and for the financial benefit of a company’s shareholders or a firm’s partners. For larger partnerships, there is a risk that issues can be hidden from the majority of partners by the top level management. The decision in Clyde & Co makes it all the less likely that a newly hired partner uncovering such issues will feel able to raise their concerns because of the risk of recriminations. After all, it is the more senior partners who have access to financial records and confidential information who are more likely to uncover and financial irregularities, yet on current case law those partners are not protected by whistle blowing legislation. There is scope for the Clyde & Co decision to be appealed to the Supreme Court, so the legal position may yet change again.

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