Supreme Court rules that LLP members are “workers” for purpose of whistleblowing protections: Clyde & Co LLP and another v Bates van Winkelhof [2014] UKSC 32
The Supreme Court has this morning ruled that LLP members are “workers” for the purpose of whistleblowing protection. They will also now benefit as workers from part-time worker, national minimum wage, pension auto-enrolment and working time rights, as well as from protections against unlawful deductions from their pay.
CM Murray LLP acted in this case for the Intervener, Public Concern at Work, the leading UK Whistleblowing charity, together with Counsel John Machell QC of Serle Court, Jonathan Cohen of Littleton Chambers and Adil Mohamedbhai of Serle Court. All the representatives for the Intervener acted on a pro bono basis.
In summary, Ms Bates van Winkelhof was held to be a worker under s230(3)(b) Employment Rights Act 1996 (notwithstanding her being an LLP member), as she could not market her services as a solicitor to anyone other than the LLP and she was an integral part of the LLP’s business. Subordination (which was regarded as a key requirement by the Court of Appeal) was not regarded as essential to show worker status.
The judgment overturns the Court of Appeal decision in this case. Further, whilst not expressly overruling Tiffin v Lester Aldridge LLP (2012), the Supreme Court made it clear that the approach taken in that case to the construction of s4(4) of the Limited Liabilty Partnerships Act 2000 was wrong. The correct position on 4(4) was as follows: “All that it is saying is that whatever the position would be were the LLP members to be partners in a traditional partnership, then that position is the same in an LLP“.
Lady Hale (who gave the leading judgment) highlighted that the law now distinguishes between self-employed people in business on their own account who contract with customers or clients, and those self-employed people who provide their services as part of a profession or business undertaking carried on by someone else. Worker protections can apply to that latter category of people, depending on the circumstances of the individual case.
Lady Hale also considered that there was a “serious challenge” to the rule that a partner can never be an employee of a partnership, by counsel for the intervener, Public Concern at Work (John Machell QC). However as it was not necessary in this case to resolve that question, she did not express an opinion on this question which she described as being of “some complexity and difficulty”.The judgment therefore left unresolved the issue of whether a partner in a traditional partnership under the 1890 Partnership Act could be an employee of their firm (and therefore employ himself or herself), and by extension whether he or she could be a “worker” in that firm for the purposes of s230(3)(b) ERA.
Further, the Supreme Court held that the whistleblowing and worker provisions should be interpreted in line with an LLP member’s right to freedom of expression under the European Convention of Human Rights, and that it was possible to do so by interpreting the ERA provisions in a completely conventional way, without raising issues of incompatibility.
In Lady Hale’s view, Ms Bates van Winklehof was “clearly” a worker within the meaning of s230(3)(b) ERA and entitled to claim the protection of its whistleblowing provisions. That conclusion was in her view “entirely consistent with the underlying policy of those provisions, which some might think is particularly applicable to businesses and professions operating within the tightly regulate fields of financial and legal services”.
Practical impact of the judgment for LLP members
- Many regulated professionals, such as solicitors, accountants and doctors, who are members of an LLP will now have the benefit of whistleblowing rights, giving them greater protection from retaliatory conduct by their firm in response to their having made a protected disclosure. Retaliation will include for example, compulsory retirement, demotion or reduction in profit share. An LLP member will be entitled to uncapped compensation based on their actual and future losses, together with an award for injury to feelings, if they are successful in showing at an employment tribunal that such treatment was an unlawful detriment by their firm on the grounds of the member having blown the whistle on wrongdoing.
- LLP members, whilst not benefiting from employee unfair dismissal protection, will nevertheless potentially now have a significant range of quasi-employment protections against certain types of unlawful treatment by their firms.
Practical impact of the judgment for LLPs
- LLPs should ensure from now on that they do not take any retaliatory action against LLP members who blow the whistle on perceived wrongdoing.
- LLPs should also carefully document genuine business reasons for any negative actions taken in respect of individual LLP members (eg compulsory retirement, demotion or downgrading of profitshare) to ensure they can prove it was not in retaliation for the LLP member having blown the whistle on perceived wrongdoing.
- Firms should update their internal whistleblowing policies (and related training) to ensure they apply to LLP members as well as employees.
- LLPs should ensure that their members are treated in accordance with their rights as workers under the working time regulations, part-time working regulations and related statutory rights and protections for workers.
- For example, the Employment Rights Act 1996 give workers the right not to suffer an unauthorised deduction from wages – LLPs will have to ensure that any “clawback” provisions in their LLP agreements are carefully drafted so as not to offend this principle.
- Members will now be covered by the Minimum Wage Act 1998. This is unlikely to cause many difficulties for LLPs, but it may be that they will need to consider whether and if so how to structure their drawings to make sure that they act in compliance with that legislation.
- As “workers” it is also likely that LLP members will be classed as eligible “jobholders” under the Pensions Act 2011, meaning that LLPs may now also be required to automatically enrol their members into an occupational pension scheme. Firms will therefore need to take specialist pensions law advice on this issue, including for example in respect of how LLP members are to be incorporated into any existing pension scheme run by the firm, or resolving issues relating to members “opting out” of automatic enrolment.
For further information on this case please contact Clare Murray on 0207 718 0090 or at clare.murray@cm-murray.com www.cm-murray.com
