Fixed share partners are not employees, EAT rules

An attempt to have fixed share partners legally defined as employees has failed at the Employment Appeal Tribunal.

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

South coast firm Lester Aldridge last week defeated an employment claim brought by former partner Martin Tiffin.

Tiffin instructed Matrix Chambers’ Claire Darwin to argue that he was an employee of the firm rather than a partner after it switched his employment status overnight to make him liable for national insurance contributions.

Darwin appealed an earlier Employment Tribunal (ET) ruling that found in the firm’s favour, arguing that because Tiffin  was not involved in the firm’s management and received only a nominal  share of the firm’s profits he should be classed as an employee.

Tiffin also made minimal financial contributions to the partnership pool that were too small to mean that he should be considered a partner, Darwin argued.

The EAT rejected the claim stating that there was no minimum threshold of partnership contributions that could change Tiffin’s partnership status.

“There’s no statutory provision or any decided case which specifies that the share of profits of a person or his or her contribution must reach a certain level before he or she can be regarded as being a partner,” Mr Justice Silber said in his ruling.

He added: “It’s worth stressing that the Employment Tribunal found that the claimant contributed to the capital and shared profits with his fellow partners with the success of the business depended on accepting a particular structure of management for partners and then for members with the consequence that he was a partner.  These were understandable conclusions, which cannot be criticised.”