We would like to place strictly necessary cookies and performance cookies on your computer to improve our website service.
To find out more about how we use cookies and how you can change your cookies settings, please read our  cookies statement.                
Otherwise, we'll assume you are OK to continue.   Please close this message

Supreme Court finds LLP members are workers

21 May 2014

In an important decision, the Supreme Court has decided that LLP members are workers. The decision is the final word on this point in the long-running case of Clyde and Co LLP v Van Winkelhof, in which Ms Van Winkelhof is bringing a whistleblowing claim.

Previous Court of Appeal decision

The Court of Appeal (CA) had previously found that to answer the question, you need to imagine the LLP operating not as an LLP but as a partnership. This was because of wording in section 4(4) of the Limited Liability Partnerships Act 2000 (the LLP Act).

The CA had already decided in a previous case (Tiffin v Lester Aldridge LLP) that if a particular individual would be considered in law to be a partner in the hypothetical partnership, then he or she could not be an employee in the LLP.

The CA decided in Van Winkelhof that an individual in that situation will not be a worker either, as there was no rational basis for a distinction between employer and worker in this context.

On the facts of this case, the CA had no doubt that Ms Van Winkelhof would have been a partner in the hypothetical partnership. She was not therefore a worker in the LLP.

Supreme Court approach

The Supreme Court has decided that the CA took the wrong approach. It found that section 4(4) of the LLP Act did not mean that members of an LLP could only be "workers" if they would have been workers if the LLP were a partnership.

Instead, section 4(4) of the LLP Act dealt with whether members were employees of the LLP (see below).

Once section 4(4) was found not to be relevant, the Supreme Court was able to look at the words in the Employment Rights Act 1998 which sets out what a worker is. Broadly, that covers:

  • anyone working under an employment contract, and
  • anyone working under a contract where they personally carry out work or services for another party where that other party is not the client/customer of a profession/business carried out by the person.

The parties agreed that Ms Van Winkelhof personally worked for the LLP, and that the LLP was not her client or customer. She was an integral part of the LLP's business, worked for the LLP alone and was not able to market her services to others.

Can a partner be an employee and/or a worker?

One of the Supreme Court Judges stated that a "serious challenge" had been presented against this rule that a partner in a traditional partnership cannot be an employee. The Supreme Court did not need to decide on whether the current law was correct, nor whether a partner could be a worker.

If the Supreme Court were to reverse the current law and find that partners could in fact be employees, it would be open to also find that members of an LLP could be employees. However these issues were not addressed, so these questions remain for another day.

Implications for LLPs

Members now have all of the protections given to workers. Importantly, they have protection under whistleblowing legislation.

LLPs should therefore ensure that their policies cover members and that disclosures by members are dealt with properly.

However there are a range of other rights which are available to workers, including protection against unlawful deduction from wages, entitlement to the minimum wage, limits on working time and the right to paid annual leave.

One right which might easily be forgotten is auto-enrolment. Members may now be caught by auto-enrolment rules leading to pension contributions being made.

This could have tax implications for some members, as it may affect their lifetime allowance unless steps are taken to opt out of auto-enrolment.

This article was written by Christopher Bushnell.

For more information please contact Christopher on +44 (0)20 7427 6427 or christopher.bushnell@crsblaw.com