Is a Partner in a Law Firm to be a ‘Worker’ within the meaning of the Employment Rights Act 1996?

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Clyde & Co LLP and another v Bates van Winkelhof

The General Issues: What is the Importance of being a ‘worker’?

The legal status, and rights therein, afforded to ‘workers’ is far more beneficial than that given to others, except for ‘employees’. This is why, in 2017, Deliveroo riders opposed the proposals the company put forward that riders be paid for each order that they delivered, rather than per hour. Doing so would help the company class riders as self-employed rather than as ‘workers’. Uber, similarly, in 2016, lost an employment appeal tribunal ruling against two of their drivers when the drivers asserted they should be classified as ‘workers’. Some of the rights that ‘workers’ are afforded include protection against unlawful discrimination, protection against unlawful deductions from wages and protection for whistleblowing (reporting wrongdoing in the workplace). This last right is one of the key questions in the case of Clyde & Co v Bates van Winkelhof.

Both the van Winkelhof and Uber cases are concerned with the Employment Rights Act 1996 (ERA 1996), and s 230(3)(b) in particular. The legal definition of a worker in this section is someone who works under any contract ‘whereby the individual undertakes to perform personally any work or services for another party to the contract’. Importantly, this other party must not be a client or customer of the ‘worker’.

The Facts of the Case

In February 2010, Bates van Winkelhof became an equity member (partner) of Clyde & Co LLP (the LLP), by virtue of which she had a fixed share in the annual profits of the LLP. In November 2010, she reported to the LLP’s money laundering reporting officers that the managing partner of a Tanzanian firm, with whom the LLP were about to start a joint venture, had admitted to paying bribes to secure work and the outcome of cases.

Following this, she attended a meeting with the LLP’s representatives to discuss the allegations made and on November 26, she was suspended. In January 2011, following an investigation, van Winkelhof was expelled by the LLP as a result of these disclosures as well as other allegations of misconduct.

The crucial question at the crux of this case was whether a partner within a law firm could be considered a worker within the meaning of the ERA 1996. If she could be deemed a ‘worker’ as dictated by s 230(3) ERA 1996, then she was entitled to the protection afforded by the Public Interest Disclosure Act 1998 when bringing a whistleblowing claim. She also claimed that these were ‘protected disclosures’ within the meaning of s 43A ERA 1996.

The Legal History

In February 2011, van Winkelhof brought claims in the Employment Tribunal where she was found to not be a ‘worker’ within the meaning of the ERA 1996. The Tribunal came to this decision because she was in business in her own right and received a share of the profits in relation to the work carried out.

She appealed this decision to the Employment Appeal Tribunal. On appeal, it was held that she was a worker – on the grounds that she was integral part of the LLP’s business, she could not offer her services to anyone else, she was in a subordinate position and the LLP were not her client.

In the Court of Appeal (CA), it was found that van Winkelhof could not be a ‘worker’ for the purpose of the s 230(3) ERA 1996 because of s 4(4) of the Limited Liability Partnerships Act 2000 (LLPA 2000). The CA using the LLPA 2000, and previous cases, determined that she could not be deemed as being employed by the LLP because partners were all in a contractual relationship with one another, in a joint venture. Therefore, if she were deemed a ‘worker’ she would be technically ‘employed’ by herself – which is a legal impossibility.

The issue with the CA decision is that it does not fully address the issue of whether van Winkelhof was a ‘worker’ or not under the ERA 1996. Using the s 4(4) LLPA 2000 It was merely determined that she could be an employee – this is because she was not in any way ‘subordinate’ to the LLP. Subordination is an integral aspect of the employer-employee relationship, but it was not determined whether or not a ‘worker’ needed to be subordinate to the employer.

The Supreme Court Decision

As van Winkelhof had been unsuccessful in the CA, she brought a final appeal to the Supreme Court. The Supreme Court found, in a unanimous decision, that she was a worker within the meaning of s 230(3)(b) ERA 1996.

The Court commented that the words ‘employed by’, in s 4(4) LLPA 2000, should cover a person who falls within the s 230(3)(b) ERA 1996 definition. They stated that the phrase ‘employed by’ should take its ordinary and natural meaning – it should only apply to those who work under a contract of service (an employment contract). Therefore, this section did not exclude those individuals who worked for an LLP who are not employees. In van Winkelhof’s contract with the LLP she personally undertook works or services for them, but she was not their client or customer. They noted that it had been established she worker under a contract ‘personally to perform any work or services’; these services were provided ‘for’ the LLP and that the LLP was neither her client nor customer. Taking all of this into consideration, the Court wondered how one could come to any other conclusion than classifying van Winkelhof as a ‘worker’.

In summary, the Supreme Court found that van Winkelhof was clearly a ‘worker’ within the meaning of s 230(3)(b) of the Employment Rights Act 1996 and entitled to claim the protection of its whistleblowing provisions.

The Wider Implications

In the bigger picture, it meant that LLPs would need to ensure that their whistleblower provisions extended to their members. They would now need to ensure that any allegation was properly investigated to avoid situations in which the whistleblower was expelled as a result of reporting the incident, as had happened to van Winkelhof. Moreover, this decision also meant that members of LLPs were entitled to rights under the Working Time Regulations, to paid annual leave and not to suffer unauthorised deductions from their wages.

This decision has equally interesting applications for people in non-legal partnerships, too. The Supreme Court noted that their decision was applicable to businesses and professions in the financial services sector. Though they stopped short of finding that partners were ‘employees’, which means that they cannot claim unfair dismissal, they will be entitled to the protection which is afforded to them by the whistleblowing legislation. Also, there is no cap on the amount of compensation that they may be awarded in such situations so it could act as a useful bargaining chip for members during exit negotiations.

By | 2018-11-21T11:19:48+01:00 October 26th, 2018|Employment Disputes, Personal Injury, Student Case Blogs|

About the Author:

Andrew Gray
I launched Truth Legal in 2012 to provide the most caring, ethical and brilliant personal injury law representation. Usually personal injury claims are a good thing, modifying negligent behaviour, shifting the financial burden off the state and reducing future injuries. I also represent people who have been poorly treated at work. I’m proud that my team give away countless hours of free legal advice.