In Tiffin v Lester Aldridge LLP, the Court of Appeal has upheld the EAT and tribunal in deciding that a fixed-share partner was not an employee. The fact that his share of the profits and his decision-making powers were limited did not detract from his status as a partner.
One of the many contentious issues around employment status is whether partners and shareholders can be employees. It is clear that full equity partners, who are responsible for running the partnership, are not employees, whereas so-called salaried partners are in fact employees earning a fixed salary. The position of fixed-share partners, who make some capital contribution to the firm and receive a small profit share in return, is not as clear cut and will usually depend on the facts.
The claimant in this case, who in order to bring various tribunal claims needed to establish his status as an employee, had been a salaried partner and later became a fixed-share partner. He had entered into a members' agreement with the other partners; was entitled to benefits which were not available to employees; received a fixed share of equity and a small profit share (as well as an entitlement to a profit share on dissolution of the partnership); had limited voting rights and was required to contribute a small amount of capital to the partnership. All these factors pointed to partnership and there was very little to suggest he could be an employee. The fact that full equity partners put much more into the partnership and got a lot more out of it, as well as having a greater management voice, did not affect the character of that status. The Court also rejected the claimant's arguments that he and his "employer" were in an unequal bargaining position and the agreement between them did not reflect the true position.