“Workers Rights” for LLP Members

27 June, 2014

The Supreme Court has ruled [1]that a former equity partner of a law firm incorporated as a Limited Liability Partnership (LLP) was a worker [2]and therefore eligible to bring a whistleblowing claim against the LLP.

 

Whilst whistleblowing claims may be relatively rare, the Supreme Court’s decision has potentially wide-reaching implications as it means that LLP members may now benefit from other legislation protecting workers, including:

 

  • part-time work;
  • national minimum wage; and
  • paid annual leave.

 

LLP members already have specific protection from discrimination.[3]

 

Following this ruling, there is also now scope to argue that LLP members may be classed as eligible ‘jobholders’ for the purposes of auto enrolment, which would mean all members would have to be automatically enrolled into pension schemes following the LLP’s staging date (save of course where the member actively elects to opt out).

 

Whistleblowing

 

Whistleblowing legislation provides protection for workers who make “protected disclosures”: any disclosure of facts made in good faith which the whistleblower reasonably believed tended to show that one or more of the following categories of wrongdoing had occurred:

 

  • Criminal offences
  • Breach of any legal obligation
  • Miscarriages of justice
  • Danger to the health and safety of any individual
  • Damage to the environment
  • The deliberate concealing of information about any of the above

 

Accordingly, LLPs will need to ensure that they do not take any retaliatory action against LLP members who have blown the whistle on wrongdoing. Retaliatory action could include compulsory retirement, demotion or a reduction of profit share.

 

Such members will now be entitled to uncapped compensation based on actual and future losses, together with potential injury to feelings awards, if they can successfully show that they have suffered any detriment by reason of a protected disclosure. 

 

Worker Status vs Employee Status

 

The status and rights accorded to “workers” at law are different and not as extensive as those that “employees” benefit from. This decision does not overrule the Tiffin v Lester Alridge[4] decision so, critically, LLP members are still not entitled to protection from unfair dismissal. The question of the employment status of partners/LLP members remains complex and difficult to give a definitive answer on.

 

Next Steps

 

  • LLPs should ensure that they recognise their members’ status as workers, and act in accordance with rights afforded to workers under the Working Time Regulations, Part-Time Working Regulations, National Minimum Wage Regulations and other related statutory protections.
  • As part of that process LLP’s should review their LLP Agreements to ensure they do not contain provisions which are contrary to these statutory protections.
  • Update internal whistleblowing policies and training to ensure that they apply to the LLP members, as well as other staff. 
  • Document genuine business reasons for any negative actions taken against members to minimise the risk a member associating those actions with the making of a protected disclosure.
  • Consider your obligations in relation to auto-enrolment if members of your LLP are not already opted out.

 

Application to Partnerships

 

Although this decision related to an LLP member, rather than a partner in traditional partnership, it is certainly arguable that partners will now be able to claim worker status in the same way as LLP members. 

 

[1] Clyde & Co LLP and another v Bates van Winkelhof [2014] UKSC 32

[2] Under section 230(3) of the Employment Rights Act 1996

[3] Under section 45 of the Equality Act 2010

[4] Tiffin v Lester Aldridge LLP [2012] IRLR 39, in which the Court of Appeal held that a fixed-share partner in an LLP was not an employee.