21/01/2016

In May 2014 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.

A decision that is likely to have extensive consequences for LLPs.

Statutory employment rights vary depending on whether someone is classed as an employee, a worker or self-employed.
Whilst employees benefit from the most protection most notably unfair dismissal rights, “workers” are also entitled to certain statutory protection, these include:

• 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
• Automatic enrolment into a suitable pension scheme.

In this recent case Ms Bates van Winkelhof the Claimant, brought a claim against Clyde & Co three years ago, stating that she was forced to leave the firm after disclosing to the firm that the managing partner of the firm’s Tanzanian associate firm had paid bribes to win clients.

Ms Bates van Winkelhof brought the complaint against Clyde & Co on the basis that she had suffered a disadvantage, by being excluded 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, Ms Bates van Winkelhof was deemed a worker and should therefore be afforded protection under the UK 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.

This was because 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.

What does this mean for the LLP?_

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.
Another issue that therefore must be considered is that of auto-enrolment, which may prove troublesome- 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.

For further information about LLP status and the implications for employees and members please contact Peter Ellis, a Partner at Beswicks Legal on 01782 205000 or by email peter.ellis@beswicks.com