Fixed share partners are not employees, CoA rules

The Court of Appeal (CoA) has given a seminal ruling on the status of fixed share partners in an unfair dismissal claim being pursued against Lester Aldridge.

The three-strong judicial panel, which was chaired by the president of the family division Sir Nicholas Wall, ruled that an LLP member is not an employee.

Furthermore, the CoA said, any decision on whether or not an LLP member should be classed as a partner depends primarily on the LLP members’ agreement and whether the parties intended that the person should be a partner.

Handing a win to Lester Aldridge and upholding the first instance ruling, Lord Justice Rimer said: “The suggestion that the ET’s decision was perverse is in my view an impossible one.”

Rimer LJ drew a distinction between the fixed share partners of Lester Aldridge LLP, who were judged to have partnership status, and the salaried partners of Lester Aldridge LLP, who made no capital contribution, had no share of profits, including on a winding up, and no voice as of right in relation to the management of the firm. Salaried partners were therefore judged to be employees.

Martin Tiffin, who had been a salaried partner, had become a fixed share partner when Lester Aldridge converted to LLP status. He received a P45, his national insurance contribution class changed and he was required to make his own pension arrangements.

If his legal challenge had been successful it would have rendered limited liability partnerships liable for national insurance contributions for fixed share partners.

The claimant alleged that, as a fixed share partner of the respondent as opposed to an equity share partner, he was an employee within the meaning of section 230(1) of the Employment Rights Act 1996 and thus entitled to bring claims against the respondent.

For the appellant: Devereux Chambers’ Shaen Catherwood instructed through the Bar Pro Bono Unit and Serle Court’s John Machell instructed under the Bar Public Access Scheme, for Tiffin.

For the respondent: Old Square Chambers’ Jennifer Eady QC leading Mark Whitcombe of the same set for Lester Aldridge. 

For more, see Opinion.