Supreme Court rules that LLP members are 'workers'

June 19, 2014

Last month, the Supreme Court overturned an earlier Court of Appeal decision and concluded that a member of a limited liability partnership (LLP) was “clearly” a worker and should therefore be protected under whistleblowing legislation. The Supreme Court’s decision in Clyde & Co LLP and another v Bates van Winkelhof is highly significant and is likely to have wide-ranging consequences for LLPs

Statutory employment rights vary depending on whether someone is an employee, a worker or self-employed. Whilst employees have the most protection (for example, unfair dismissal rights), “workers” enjoy certain statutory protection, including rights to:

  • paid annual leave;
  • national minimum wage;
  • a maximum 48 hour working week, unless they have expressly waived the requirements of the Working Time Regulations 1998;
  • protection against detriment for having blown the whistle; and
  • automatic enrolment into a suitable pension scheme.

The Claimant, Ms Bates van Winkelhof, brought a claim against Clyde & Co three years ago, asserting that she was forced to leave the firm after blowing the whistle by disclosing to the firm that the managing partner of the firm’s Tanzanian associate firm had paid bribes to win clients. The Claimant brought the complaint against Clyde & Co on the basis that she had suffered a detriment, by being expelled from the partnership, because she made this disclosure.

A key part of the Supreme Court’s decision was the finding that there was no need for any element of subordination in the relationship between a worker and their employer. The Court noted that while subordination may sometimes be an aid to distinguishing workers from other self-employed individuals, it is not a universal characteristic of being a worker. Accordingly, the Claimant in this case was a worker and should be afforded protection under the UK whistle-blowing legislation. The Court found that Ms Bates van Winkelhof did not fall into an exception designed to exclude a relationship between self-employed individuals and their clients. Since she could not market her services as a solicitor to anyone other than Clyde & Co, and she was an integral part of their business, the firm was in no sense her client or customer.

It is likely that nearly all members of a typical professional services firm or financial services firm will be considered workers, and so firms will need to consider whether amendments are required to their Members’ Agreement to reflect workers’ rights. The issue of auto-enrolment is likely to be a particularly thorny issue - especially for those firms who have already passed their staging date or are about the meet it – and it is hoped that the Government will consider adjusting the Pensions Act to expressly deal with the issue of LLP members. Until then, firms may be able to argue that a member is remunerated solely by profit share and that profit share does not count towards 'qualifying earnings' thereby allowing the member to fall outside the scope of auto-enrolment. 

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