The legal concept of limited liability partnerships (LLPs) was introduced in 2000, giving them a legal personality distinct from that of its members. In Clyde & Co LLP v Bates Van Winkelhof, the Court of Appeal said that members of LLPs cannot also be workers and cannot therefore benefit from certain rights, such as bringing a whistleblowing claim.
Basic facts
Ms Bates Van Winkelhof was hired by Shadbolt & Co LLP in 2005, initially as an associate solicitor, to develop Shadbolts' relationship with a Tanzanian law firm. In early 2009, the firm entered into a new agreement with a different firm, Ako Law, and she was retained on essentially the same basis. In February 2010 she became an equity partner in Shadbolts.
On 23 November 2010 she reported that the managing partner of Ako Law had been involved in money laundering and had paid bribes both to secure work and to effect the outcome of cases. She was dismissed by Ako Law on 25 November and expelled as a member of Shadbolts in January 2011.
She brought a whistleblowing complaint under section 47B of the Employment Rights Act 1996 (ERA) against Clyde & Co alleging she had suffered a number of detriments (disadvantages), in particular being expelled as a member, because she had made protected disclosures.
Clyde & Co argued that as Ms Bates Van Winkelhof was not a worker as defined by section 230(3) of the ERA (someone who works personally for the other party to the contract who is not a “client or customer of any profession or business undertaking carried on by the individual ...”) , she could not bring a whistleblowing claim.
Tribunal and EAT decisions
The tribunal agreed with Clyde & Co that, as an equity member of the firm who shared in the profits, Ms Bates Van Winkelhof was not a 'worker' under the definition in section 230(3)(b), as she was in business in her own right.
The Employment Appeal Tribunal, however, disagreed. It held that, as Clyde & Co was not her client or customer, she could therefore be a worker under limb “b”.
Court of Appeal decision
The Court of Appeal first of all reviewed the case law as to who can be classed as a “worker” and identified that the key question is the degree of independence that the individual enjoys. It then went on to allow the appeal on the basis of a new point - that Ms Bates Van Winkelhof could not be a worker because of section 4(4) of the Limited Liability Partnership (LLP) Act 2000.
Commenting that it was a “puzzling section” to interpret, the Court said that its meaning lay in the employment status of partners under the Partnership Act 1890. Basically, if the individual was an employee or worker under that Act, then they would be an employee or worker as a member of the LLP.
In the present case, the first issue to decide was whether, if there were a partnership under the 1890 Act, Ms Bates Van Winkelhof would be a partner. As she clearly would have been (she was pursuing a business for profit in common with others), the next question to decide was whether she could be a worker.
The Court concluded that she could not. Since a partnership was “not a separate legal entity, the parties are in a relationship with each other and accordingly each partner has to be employed, inter alia, by himself”. Otherwise they would be both worker and employer which was a legal impossibility. It added that the essential characteristic of a worker is that they are to some extent subordinate to the employer, but with partners in a joint venture, “that characteristic is absent.' Her claims were therefore dismissed.