The claimant in Clyde & Co LLP v Bates van Winkelhof, a solicitor, became a fixed share equity member of a limited liability partnership (LLP) in 2010. Following her expulsion from the LLP a few months later, she made various claims, including that she was subject to detriments as a result of what she alleged were protected whistleblowing disclosures to the LLP's money laundering officers, relating to the activities of an overseas law firm with whom the LLP was doing business.
The issue in this part of her claim was whether a member of a LLP can be a "worker" within the definition in the Employment Rights Act 1996, thereby entitling her to claim the protection of its whistleblowing provisions.
It is clear from the case law to date 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.
Here the Employment Tribunal found that the LLP member was not a "worker"; the EAT held that she was. The LLP's appeal to the Court of Appeal was successful, but on a completely different ground, based on a difficult provision in the Limited Liability Partnership Act. But the Supreme Court decided, in effect, that the provision was not relevant and, applying the traditional principles, concluded that she was a worker. The Court stressed the importance of the distinction between two kinds of self-employed:
- those who are in business on their own account who contract with customers and clients – they are not workers
- those who provide services as part of a business undertaking carried on by someone else – they are workers.
The claimant clearly fell into the second category. She could not market her services as a solicitor to anyone other than the LLP and she was an integral part of the LLP business. The Court rejected the analysis of the Court of Appeal that one party has to be in a subordinate relationship to the other in order to be a worker.
The conclusion in this case turns on the special characteristics of a LLP, which is a hybrid between a conventional partnership and a limited company; the judgment leaves open the question of what the position would be for a "traditional" fixed-share partner. Given the number of LLPs – particularly in the professional and financial services sectors – the decision is of some significance and LLPs will need to ensure that their whistleblowing policies cover members as well as employees. "Worker" status is also the gateway to rights other than whistleblowing protection, including holiday pay, protection from unlawful deductions from wages and pension contributions from the employer under the auto-enrolment regime.