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Worker rights for LLP members

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In a much awaited judgement, the Supreme Court has recently ruled that LLP members are workers for the purposes of entitlement to protection under whistleblowing legislation.

In a much awaited judgement, the Supreme Court has recently ruled in the case of Clyde & Co. LLP v Bates van Winklehof that LLP members are workers for the purposes of entitlement to protection under whistleblowing legislation. We consider the implications.

This case has arisen out of claims by a Ms Bates van Winklehof, a former fixed share partner of Clyde & Co., for sex discrimination and detriment on grounds of whistleblowing following her expulsion from the LLP. She claimed that prior to her expulsion she made protected disclosures that the managing partner of a Tanzanian law firm with which Clyde & Co. entered into a joint venture had admitted paying bribes to secure work and to affect the outcome of cases.  Clyde & Co. sought to have the whistleblowing claim struck out at a Preliminary Hearing on the basis that the whistleblowing legislation which protects employees and other defined types of "worker", did not cover members of an LLP.

The Supreme Court’s finding was based partly on a close reading of the whistleblowing legislation and of the Limited Liability Partnerships Act 2000, the enabling legislation for LLPs and partly on its assessment of the underlying spirit and intention of the whistleblowing legislation.

The case is seen as significant, particularly for those in the financial, accountancy and legal sectors were LLPs are common. Where an LLP member leaves on bad terms, that member will always look how far he can have access to employment law remedies to supplement whatever rights he has under the relevant limited liability partnership agreement., Although partners and LLP members are not employees and so do not qualify for statutory employment protection, such as the right not to be unfairly dismissed and the right to receive a statutory redundancy payment on redundancy, it has been commonplace for exiting partners to find allegations of discrimination based on race, gender or age, for which partners do enjoy protection in a similar way to employees, and which afford the potential of uncapped damages. Compensation for detrimental treatment under the whistleblowing legislation is also uncapped and we are likely to see an increasing use of allegations of detrimental treatment on grounds of whistleblowing from disgruntled LLP members on exit from the partnership.

Perhaps an even more interesting question is how far this classification of LLP members as workers will carry over into other fields of employment law. The case does not mean that LLP members get all the same rights as employees. But the term "worker", with very similar definitions to the one used in the whistleblowing legislation, is used in various other contexts including for the purposes of defining statutory protections for part time workers, protections from unlawful deductions from wages, payment of the national minimum wage, rights under the Working Time Regulations and rights in respect of pension auto enrolment.

Auto enrolment is a particular concern because it creates a positive duty on the employer to act, enrolling partners in the scheme and paying employer contributions. The Pensions Regulator has already indicated that, in its view, LLPs should assume that the Supreme Court’s decision is equally applicable to the Pensions Act 2008 for automatic enrolment purposes. The effect of this is not that every partner of an LLP is necessarily a ‘worker’ for automatic enrolment purposes rather that they could be a ‘worker’ for automatic enrolment. LLPs will now need to assess each of their partners against the definition of worker in the Pensions Act to determine whether the partner is a worker or is self-employed for automatic enrolment purposes.

The Pensions Regulator has also indicated that where an LLP now determines that a partner is a worker for automatic enrolment and should have been treated as a worker since a date on or after the LLP’s staging date, the LLP should take steps to automatically enrol the partner with effect from that partner’s automatic enrolment date (unless the partner already was an active partner of a qualifying scheme on this date). The partner’s automatic enrolment date is the first date that the eligible jobholder criteria were met by the worker. As the Pensions Act requires membership with effect from the automatic enrolment date, automatic enrolment may include the backdating of contributions or accrual (depending upon the type of pension scheme being used).

It will be interesting to see how far the principle that LLP partners are workers is taken in other areas.

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