The Supreme Court’s decision in the case of Clyde & Co v Bates van Winkelhof 1 has provided welcome clarification of the scope of whistleblowing protection for partners and members of Limited Liability Partnerships (LLPs).
The question for determination was whether the claimant, a member of a LLP could be a “worker” within section 230(3)(b) of the Employment Rights Act 1996 (ERA). If so, the claimant could claim protection from detriment (which in the claimant’s caseincludedexpulsionfromtheLLP) on the grounds that she had made a whistleblowing complaint.
In summary [set out more fully in the previous article – cross ref to “Protection for Partners which way will the wind blow”], the claimant, a member of Clyde & Co, an English registered LLP, was paid a fixed share and 20% of the profits of a joint venture with Ako Law, a Tanzanian law firm, with whom she principally worked.
She alleged that on 23 November 2010 she reported to Clyde & Co that the managing partner of Ako Law had paid bribes and was involved in money laundering. She was dismissed by Ako Law on 25 November 2010 and suspended by Clyde & Co the following day. Following an investigation, she was expelled as a member of Clyde & Co on 13 January 2011.
The case concerns the statutory definition of a “limb (b) worker” defined as:
“an individual who has entered into, works under (or where the employment has ceased, worked under):
- 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 professional business undertaking carried on by the individual”.
Decision – the leading judgment
Delivering the leading judgment, Lady Hale decided that on an ordinary reading of the relevant provision of the ERA, the claimant was clearly a worker and therefore entitled, in principle, to the same whistleblowing protection as an employee. She provided services for Clyde & Co, which was clearly not her client or customer.
In fact she went on to express the view that “the immediately striking thing about this case is how much hard work has to be done in order to find that a member of an LLP is not a worker…”.
Two arguments had been put forward in the court of appeal, however, as to why, notwithstanding the clear wording of the ERA, the claimant could not take the benefit of the whistleblowing protection.
Section 4(4) Limited Liability Partnership Act 2000 reason
“A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless if he and the other members were partners in a partnership he would be regarded for that purpose as employed by the partnership.”
Lady Hale’s view was that section 4(4) was of limited scope. It simply meant that whatever the position would be if LLP members were partners in a traditional partnership then that position would be mirrored in an LLP.
And that “employed by the partnership” was similarly limited. It should not be construed to include within its ambit “those who undertake to do or perform personally any work or services for another party to the contract” under section 230(3) ERA.
The “subordination” reason
The second was the “sociological reason” put forward by Lord Justice Elias that “the partnership concept is the antithesis of subordination” and that some degree of “subordination” was necessary for the protection to be provided.
Having reviewed the authorities in the discrimination law arena, Lady Hale made it clear that each case had to be decided by applying the words of the statute to its facts Even though this may not always be easy, it should not be resolved “by adding some mystery ingredient of subordination to the concept of employee and worker”.
A new Human Rights angle?
Lady Hale went on to consider whether Article 10 of the European Convention on Human Rights (ECHR), which provides for a qualified right to freedom of expression, had any place in this context.
She referred to a case of the dismissal of a nurse who had reported her employer to the prosecuting authorities because of under staffing and who was found to have had her Article 10 rights violated2. In that case, the right of the nurse to disclose information had been closely examined, including whether she had pursued a legitimate aim in making her report and whether the steps she had taken were proportionate to that aim. Article 10 applies to the workplace in general3 and in the private law sphere4 but here it was not necessary to consider the ECHR rights as the claimant had clear protection under the ERA.
The supporting judgments
Lord Clarke found in favour of the claimant on the basis that a limb b worker would be “regarded for any purpose as employed by” the LLP within section 4(4) of the LLPA in any event. He said that the common law “employment” terminology had been given much wider meaning under the ERA to include people working other than under a contract of employment. Lord Carnwath provided some comments (obiter) on the assertion made5 that the traditional view that a partner cannot be an employee of his own firm was open to challenge6. Whilst this point was not decided, it was his clear view that the particular arguments raised in this case did not assist this argument. He reiterated the fundamental difference between the partnership relationship and that of employer and employee.
The decision is not a surprising one, both because of the wording of the statute and also because of the climate in which commercial parties are now operating, where, in the wake of a number of public scandals, more regulation and closer public scrutiny are generally considered necessary and desirable.
It is also unsurprising because, as Lady Hale said expressly, it is consistent with the policy considerations which underpinned this part of the ERA; essentially that workers should be encouraged to speak up about their concerns of workplace wrongdoing, without fear of sanction. There is therefore no reason in principle why any category of person at work should not be entitled to be protected against retaliation for speaking out about wrongdoing, subject to the public interest test7.
For the claimant though, it is still only the beginning. She now returns to the employment tribunal for the hearing of the substance of her claim. However, the repercussions of the decision are likely to mean that partnerships and LLPs will need to look closely at their whistleblowing codes to ensure they provide adequately for partners. They will also want to look at their partnership and LLP agreements to see if any modifications are required or advisable. It is unlikely that it will lead to a proliferation of whistleblowing to external bodies8 but it may be the case that partners or members seek to use the decision to their advantage in negotiating any settlement when they leave in hostile circumstances.