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17 January 2013

Member of LLP ‘not a worker’

A member of a Limited Liability Partnership (LLP) could not be viewed as a ‘worker’ for the purpose of making a whistleblowing complaint because her relationship with the firm for which she worked lacked the essential characteristics of service, control and subordination, the Court of Appeal has ruled (Clyde & Co LLP and Another v Winkelhof).

The woman argued that she had been expelled from her partnership in a law firm because she had made protected disclosures. However, the Court ruled out that claim on the basis that she did not fit the definition of ‘worker’ contained in Section 230(3) of the Employment Rights Act 1996.

In an important ruling for all LLPs, Lord Justice Elias said, “The very concept of employment presupposes as a matter of sociological fact a hierarchical relationship where the worker is to some extent at least subordinate to the employer.

“This is a characteristic which underpins the general understanding of what constitutes the essence of an employment relationship. Where the relationship is one of partners in a joint venture, that characteristic is absent. Each partner is agent for the other and is bound by the acts of the other and each partner is both severally and jointly liable for the liabilities of the partners.”

Observing that to be ‘both workman and employer’ is a ‘legal impossibility’ and that ‘the partnership concept is the antithesis of subordination’, the judge said that partnerships lack the relationship of service and control which is inherent in the concepts of both employee and worker.

The Court’s decision that the woman’s whistleblowing complaint cannot proceed does not preclude her from pursuing sex discrimination claims against her former firm, however, as Section 45 of the Equality Act 2010 specifically extends protection to partners of LLPs. The firm’s argument that those claims should also be struck out, because the woman worked principally outside the United Kingdom, was rejected by the Court.

The confirmation that the whistleblowing legislation does not protect equity partners puts someone who becomes aware of criminal misdeeds on the part of their fellow partners in a difficult position, particularly as partners can be jointly and severally liable for losses to the partnership that result from the activities of their fellow partners. If you find yourself in such a position, contact employment law partner Jo Davis for advice on what steps to take.

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