The effect of the Limited Liability Partnerships Act 2000 s.4(4) was that a member of an LLP who would have been a partner under the Partnership Act 1890 could be neither an employee nor a worker under the Employment Rights Act 1996 s.230.
Bates van Winkelhof v Clyde & Co LLP.  EWCA Civ 1207. Elias, LJ; Lloyd LJ; Richards, LJ. 26 September 2012.
Appeal allowed in part
Clyde & Co appealed against a decision that the respondent van Winkelhof was a “worker” for the purposes of the Employment Rights Act 1996 s.230. The respondent was an equity member and had been seconded to Tanzania as part of a joint venture with a Tanzanian law firm.
She worked in Tanzania for the majority of the time but worked in London several times a year, for approximately two weeks at a time. She paid tax in Tanzania and National Insurance in Britain. She was dismissed by the Tanzanian firm after alleging that it was involved in money laundering.
Clyde & Co expelled her from the partnership. She brought a whistleblowing claim and a sex discrimination claim against the firm.
Her claims could only succeed if she was found to be a “worker” within the meaning of s.230(3), and if the tribunal had jurisdiction to hear her claims. The firm submitted that she could not be a worker because of the effect of the Limited Liability Partnerships Act 2000 s.4(4). The firm also argued that when determining the question of jurisdiction the tribunal should have compared the factors pointing towards Britain with those pointing towards Tanzania.
Appeal allowed in part
The concept of a “worker” embraced employees, being persons employed under contracts of employment under s.230(3)(a), and those under s.230(3)(b) who personally undertook to provide work for another, but did not qualify as employees.
The meaning of s.4(4) of the 2000 Act had to be gleaned from the context in which it was passed. The intention was that whatever the employment status of the partners under the Partnership Act 1890, it should not alter when the partners were transformed into members of a limited liability partnership under the 2000 Act.
It followed that the words “employed by the limited liability partnership” in s.4(4) meant employed as an employee or as a worker under s.230(3)(a) and (b).
Therefore, in the instant case the first question was whether, if there had been a partnership under the 1890 Act, van Winkelhof would have been a partner.
There was no doubt that she would have been a partner. She was plainly pursuing a business for profit in common with others. The next question was whether, as a partner of a partnership formed under the 1890 Act, she could be a worker under s.230(3)(b).
There was clear authority for the proposition that a partner in an 1890 Act partnership could not be an employee.
The partnership was not a separate legal entity. The parties were in a relationship with each other. To be an employee a partner would have to be both workman and employer, which was a legal impossibility. Further, the concept of employment presupposed the worker being subordinate to the employer, but where the relationship was one of partners in a joint venture, that characteristic was absent. The reasoning in Ellis and Cowell provided no rational basis for distinguishing between employees and workers under s.230(3)(b).
A member of an LLP who would have been a partner in an 1890 Act partnership had it not been registered as an LLP could be neither an employee under s.230 nor a worker under s.230(3)(b). It followed that van Winkehof could not pursue her whistleblowing claim.
When determining jurisdiction, the comparative exercise would be appropriate where the claimant was employed wholly abroad. In those circumstances it was necessary to identify factors which were sufficiently powerful to displace the territorial pull of the place of work.
However, that was not necessary where the claimant lived and/or worked for at least part of the time in Britain. In the latter situation all that was required was that the tribunal should satisfy itself that the connection with Britain was sufficiently strong to enable it to be said that Parliament would have regarded it as appropriate for the tribunal to deal with the claim.
That aspect of van Winkehof’s appeal was therefore dismissed and it followed that she could pursue her discrimination claims.
For the appellants Clyde & Co
Andrew Stafford QC, Littleton Chambers
Chris Quinn, Littleton Chambers
For the respondent van Winkelhof
Tom Linden QC, Matrix Chambers
Joanna Blackburn, partner, Mishcon de Reya
In this case the Court of Appeal (CoA) held that members of LLPs are not “workers” and cannot claim whistleblowing protection. Although the case dealt with fixed-share partners, the reasoning applies equally to all members.
LLP members often have professional obligations to take the unpopular step of reporting wrongdoing. An LLP member may be duty-bound to report false accounting or the misappropriation of client funds. Following Winkelhof that member will not be able to claim statutory protection if they are then removed as a member or ‘punished’ in the next pay review.
A further consequence is that LLPs will not be required automatically to enrol their members in pension schemes when the new laws come in.
Lest LLPs become complacent, the ruling does nothing to restrict members’ statutory protection from discrimination and victimisation. If a member reports potential discrimination it remains unlawful to subject them to detriment as a result.
The CoA decision may not be the last word. The point is of general public importance and the legal and policy issues are finely balanced.
Is it correct that partners
cannot be workers as they cannot employ themselves? Is “subordination” necessary for worker status? The Supreme Court may well be interested in revisiting the issues.
Judy Stone, 11KBW