The UK Supreme Court has ruled in Clyde & Co v. Bates van Winkelhof [2014] UKSC 32 that members of Limited Liability Partnerships (LLPs) are workers who can benefit from whistleblower protections. This could have far-reaching implications for LLPs and their members.

Background

Ms Bates van Winkelhof was a partner working for Clyde and Co. After being expelled from the LLP she brought claims in relation to whistleblowing and sex discrimination.

The employment tribunal at first instance held that it had no jurisdiction to hear the whistleblowing claim, as Ms Bates van Winkelhof was not a "worker". A worker is defined in s230(3) of the Employment Rights Act 1996 (ERA 96) as an individual who has entered into or works under (or, where the employment has ceased, worked under):

  1. a contract of employment; or
  2. any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

Previous cases have distinguished between those who are workers and those who are not by examining the degree of the individual's subordination to the party to whom they are providing their services.

Ms Bates van Winkelhof appealed to the EAT, which found in her favour and decided that she was a worker within s230(3)(b) ERA 96. Clyde & Co in turn appealed to the Court of Appeal, which agreed with the law firm. The Court of Appeal found that Ms Bates van Winkelhof was not a worker and that the EAT had been mistaken in concentrating on the fact that she had agreed to devote her time and attention to the business of the LLP and could not work for anyone else. It should instead have focused on other matters, such as the fact that she could take an active part in running the LLP, which was at odds with the concept of subordination.

Supreme Court Decision

The Supreme Court held that, despite Ms Bates van Winkelhof being a member of the LLP, she was also a worker under s230(3)(b) ERA 1996. Lady Hale, giving the lead judgment, held that Ms Bates van Winkelhof was a worker, because she could not market her services as a solicitor to anyone other than the LLP, and she was an integral part of the LLP's business. The LLP was in no sense her client or customer.

Lady Hale highlighted the fact that the law now draws a distinction between two different kinds of self-employed people. One kind are people who carry on a profession or a business undertaking on their own account entering into contracts with clients or customers to provide work or services for them. The other kind are self-employed individuals who provide their services as part of a profession or business undertaking carried on by someone else – in this case, Clyde & Co. These individuals are capable of being workers in certain circumstances.

Lady Hale stated that, while subordination may sometimes be an aid to distinguishing workers from other self-employed people, it is not a freestanding and universal characteristic of being a worker. She drew parallels with the situation of a controlling shareholder who is also employed as a chief executive, who is effectively his own boss and yet may be a worker.

Lady Hale considered this conclusion to be entirely consistent with the underlying policy of the legislation protecting workers. Some might think this particularly applicable to businesses and professions operating as LLPs within the tightly regulated fields of financial and legal services. If individual LLP members in these businesses are not protected from retaliation for whistleblowing, ultimately it is the customers and clients of the businesses who are at risk.

Implications of the decision

LLPs will now need to be careful that they do not subject anyone who may have made a protected disclosure (blown the whistle) to any detrimental treatment as a result. Where individuals are expelled from LLPs, or treated in any unfavourable way, clear notes should be made of the reasons for the expulsion or treatment so it is evident it was not in response to a protected disclosure.

LLPs also need to think beyond whistleblowing issues as the finding that LLP members are workers has wider implications. As workers, LLP members will also have the right to paid annual leave and the right to receive the National Minimum Wage. The limits on working time and protection from less favourable treatment as a result of working part-time will also apply to LLP members.

Furthermore, LLP members will also be able to bring claims for unauthorised deductions from wages, so LLPs should carefully check any clawback provisions contained in their LLP agreements. It is also likely that LLP members will be entitled to be enrolled into occupational pension schemes as they will be deemed to be eligible jobholders under the Pensions Act 2011. This last point could have significant consequences for LLPs, which are unlikely to have put auto-enrolment arrangements in place for their members as opposed to their employees.