The Court of Appeal has held that a member of an LLP will not be a "worker" for the purposes of employment protection legislation provided that, had the LLP been formed as a general partnership, the individual would have been a partner of that partnership. It also found that she had sufficiently close links with the UK to bring a discrimination claim here, despite working principally overseas.
Bates van Winkelhof v Clyde & Co & Anor
The Claimant, B, was an equity partner at Clyde & Co (C&C), having joined them following C&C's acquisition of another law firm, Shadbolts. She was seconded to a Tanzanian law firm, by whom she was employed. She worked principally in Tanzania, although she spent a significant amount of time working in London. It was originally contemplated that she would visit the UK about 6 times per year for approximately 2 weeks on each occasion, and in fact she spent 78 days working in the London office during the first 11 months of 2010.
Her partnership terms were governed by an LLP deed which was subject to English law, under which she was entitled to receive a fixed annual share of the profits of C&C's business, a fixed income attributed to her employment with the Tanzanian law firm, as well as a share of the profits from C&C's interest in a joint venture with the Tanzanian law firm.
B was expelled from the C&C partnership. She claimed she had suffered a detriment as a worker because she had made a protected disclosure under the Employment Rights Act 1996 ("ERA"), and that her expulsion amounted to unlawful sex discrimination under the Equality Act 2000 ("EqA").
A pre hearing review was listed to consider two preliminary issues:
- The worker point: whether B was a "worker", and therefore entitled to pursue her whistleblowing claim.
- The territorial jurisdiction point: whether the Employment Tribunal had jurisdiction to hear B's claims, bearing in mind that she worked primarily in Tanzania.
At a pre-hearing review, the Tribunal found that B was not a worker but that it did have jurisdiction to hear B's discrimination claim, due to her strong connections with GB. On appeal, the EAT overturned the Tribunal's decision on the worker point, but upheld its decision on the territorial jurisdiction point. Both points were then appealed to the Court of Appeal
The Court of Appeal decision
The worker point
The Court of Appeal concluded that B was not a worker. Unlike in the lower courts, where the decisions turned on the definition of "worker" in section 230(3) of the Employment Rights Act 1996, the Court of Appeal based its decision on section 4(4) of the Limited Liability Partnership Act 2000 ("LLPA"), which states that:
"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."
The Court of Appeal held that the intention behind this section was that rights should neither be gained nor lost when partners in an unincorporated partnership are transformed into members of an LLP. It was already well established that partners cannot be employees. The Court of Appeal also decided that partners in an unincorporated partnership cannot be workers, since (a) a partnership does not have a separate legal entity and a partner could not be both workman and employer; and (b) the degree of subordination required for a "worker" relationship is not present in a partnership. Therefore, if B would have been a partner, had C&C been an unincorporated partnership, she could be neither an employee or a worker.
The Court of Appeal concluded that it was not conceivable that, if the practice of C&C had been carried on by an unincorporated partnership, B could have claimed not to be a partner, as she had signed up to the partnership agreement, which gave her significant rights of participation in running the firm. Therefore she was not a worker.
The territorial jurisdiction point
On the territorial jurisdiction point, the Court of Appeal held that B did have jurisdiction to bring her sex discrimination claim, as her connection with GB was "sufficiently strong".
C&C had argued that the Supreme Court's decision in Ravat v Halliburton Manufacturing and Services Ltd (2012) requires an expat employee to show a stronger connection with GB than the country in which they work if they are to bring a claim in GB. However, the Court of Appeal rejected this, explaining that this will only be the case where an individual works wholly abroad. In those circumstances there is a strong presumption that Parliament did not intend the UK courts to have jurisdiction, and the claimant will need to identify factors that are sufficiently powerful to displace that presumption.
However where, as in this case, the claimant lives and/or works for part of the time in GB, all that is required if for the Tribunal to satisfy themselves that the connection with GB is "sufficiently strong to enable it to be said that Parliament would have regarded it as appropriate for the tribunal to deal with the claim".
In this case, the Tribunal had been entitled to find that B had sufficiently strong connections with the UK given that she worked partly in Great Britain and had administrative support here, the LLP Agreement was governed by English law, she agreed budgets with her partners in London, time recording and invoicing was done through C&Cs systems in Great Britain, she appeared on the Law Society's list of solicitors as a member of C&C and was referred to as a member of C&C in its press releases.
This is the first case which considers whether LLP members can be workers. The decision will come as a welcome relief for partnerships, as the EAT's decision had left the door open for equity partners to pursue a range of employment claims.
The Court of Appeal's decision on the territorial jurisdiction point is also of interest. The Equality Act contains no provisions which set out the territorial scope of discrimination law and until we have authoritative case law, the position is uncertain. The present case confirms that where the test developed in the line of cases starting with Lawson v Serco is satisfied, the Tribunal will have jurisdiction to hear a discrimination claim. However, the Court of Appeal left open the possibility that the Tribunal might have a wider jurisdiction in discrimination cases, to give effect to European law.
We understand that both parties are considering appealing this decision, so the Court of Appeal's decision may not be the last word on these issues.