The Supreme Court has ruled that members of LLPs (often referred to as 'partners') enjoy certain employment protection rights, crucially whistleblowing, owing to their status as workers.
A 'worker' is a hybrid label given to individuals who are not employees of a firm but are not independent self-employed contractors either. It was introduced by the Working Time Regulations of 1998 and has been argued about in the courts ever since. In short, an employee is someone closely linked to a firm and who is required personally to carry out that firm’s instructions; in return the firm is obliged to provide the employee with work. Conversely, a self-employed contractor is independent of the firm and only carries out work for it on the basis of a client relationship. A worker falls between these two definitions. They are self-employed and less subject to the control of the firm but nevertheless are in a personal contract with that firm to carry out work. Crucially, they are not in business on their own account and are not able to market their services to clients in general.
Previously the Court of Appeal had held that partners in an LLP could not be workers because there is no subordinate relationship with the LLP. Partners enjoy considerable independence and are not subject to strict line management. As such, they are independent contractors. Yesterday the Supreme Court overruled this. It reminded people that the test is a straightforward one. Only if the individuals are able to operate as a business, generally entering into contracts with clients, will they be genuine self-employed contractors. Partners are not able to operate like this and must provide their services to just one firm. They are workers. Another way of looking at it is they are dependent on one particular firm for their income and accordingly need a degree of protection.
LLPs should be aware that their members will have rights under whistleblowing legislation and other areas of employment law, such as the right not to suffer a deduction from wages. They may also benefit from pension auto enrolment.