LLP Members can be "workers", with protection under whistleblowing legislation
Published 22 May 2014
The Supreme Court has ruled that a solicitor who was a member of a limited liability partnership was also a "worker" for the purposes of protection against detriment and dismissal under the Employment Rights Act 1996.
The appellant, Krista Bates van Winkelhof, was a member of Clyde & Co LLP. She was an equity partner with responsibility for developing a joint venture with a Tanzanian firm. In November 2010 she reported to the firm's money-laundering reporting officers that the managing partner of the Tanzanian firm had admitted paying bribes to secure work and the outcome of cases. In January 2011 she was expelled from the LLP.
She claimed that she had made "protected disclosures" within the meaning of Section 43A of the Employment Rights Act 1996 (introduced under the Public Interest Disclosure Act 1998 which provides protection for whistleblowers). The allegations were refuted by the firm, who asserted that in any event she was not a "worker" entitled to bring such a claim. Although the Employment Tribunal declined jurisdiction on this basis, the Employment Appeals Tribunal allowed her claim to progress. Clyde & Co LLP then appealed to the Court of Appeal who considered whether she could be "employed" by the LLP for the purposes of the 1996 Act, in the light of Section 4(4) of the Limited Liability Partnerships Act 2000. This section provides that a member of an LLP can not be regarded as employed by the LLP unless "if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership". The Court of Appeal found it difficult to reconcile the wording of the 2000 Act with the earlier employment legislation and concluded that Ms Bates van Winkelhof was not a "worker".
In a decision given by the Supreme Court on 21 May 2014, the Court of Appeal decision was reversed and the Supreme Court concluded Ms Bates van Winkelhof was a "worker". The Court of Appeal had put too strained an interpretation on the wording of the 2000 Act. It was clear that, for the purposes of being a "worker" (under the second limb of Section 230(3) of the 1996 Act), Ms van Winkelhof had worked under "any other contract...whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of that contract that of the client or customer". The Appellant had signed a "Deed of Adherence" to the LLP's Members Agreement. While this was clearly not a contract of employment, it did fall within the second limb of Section 230(3) of the 1996 Act. It was clear that she was engaged in a relationship with the LLP, in which the LLP was neither a client or customer, and in which she had a subordinate role to perform work personally, consistent with the status of a worker.
In these circumstances Ms van Winkelhof can now proceed to pursue her whistleblowing claim in the Employment Tribunal.
What does this mean for Limited Liability Partnerships?
LLPs need to take note of this landmark decision and consider the practical implications they may have, in the light of the procedures they have in place to deal with issues of concern raised by members. If a comprehensive and clear procedure is in place, whereby members can raise legitimate issues without fear or favour and in the knowledge that they will be handled in a clear, objective and effective manner, the LLP should be confident in their process. Plainly, where a member is subject to any form of reprisal, up to and including expulsion from the LLP, following the making of a protected disclosure, there is now a real risk that the member will bring a whistleblowing claim in the Employment Tribunal. Since there is no cap on the compensation that can be awarded for losses suffered by a successful claimant in a whistleblowing case, care should be taken to ensure that the management of the issue raised which constitutes a protected disclosure will withstand close scrutiny. The member must not be subjected to any unjustified mistreatment as a result of raising the issue. (Disclosures qualifying for protection are disclosures of information made in the public interest which the worker reasonably believes shows or tends to show:
- That a criminal offence has been committed, is being committed or is likely to be committed;
- That a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject;
- That a miscarriage of justice has occurred, is occurring or is likely to occur;
- That the health or safety of any individual has been, is being or likely to be endangered;
- That the environment has been, is being or is likely to be, damaged; or
- That information tending to show any matter falling within any one of the preceding paragraphs has been, or is likely to be, deliberately concealed.)
Moreover, the decision has wider implications in that it will serve as good authority to provide protection to members who are "workers" for the purposes of other workplace legislation. This includes legislation governing working time, less favourable treatment of part-time workers and the national minimum wage. While LLP members are generally sufficiently well paid that claims for national minimum wage are highly unlikely, LLPs should be aware of the potential for claims being brought by disgruntled members in relation to working time and part time arrangements.