The court's decision raises some key points but the issue is far from resolved, says Eversheds' Simon Rice Birchall

Neither case law nor statute had addressed whether or not members of a limited liability partnership (LLP) might have the legal status of 'workers' until the decision of the Court of Appeal in Clyde & Co v Bates van Winkelhof [2012] EWCA Civ 1207. The case also addressed territorial jurisdiction issues as the claimant worked mostly in Tanzania.

The law creating LLPs is difficult to interpret. As regards to employment status, section 4(4) of the Limited Liability Partnership Act 2000 provides: "A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership."

In Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35, the Court of Appeal provided some clarification, holding that LLP members who would have been partners in a partnership cannot be 'employees'. However, the question remained as to whether or not partners could be workers. 

The courts and tribunals rely on factors such as whether or not the individual undertakes to provide personal service, whether there is mutuality of obligation between the alleged worker and the 'employer' and the extent to which the relationship between the individual and the recipient is that of client or customer. 

Although partners of an LLP have specific protection from discrimination under the Equality Act 2010, many other rights depend on whether or not they are workers. Workers qualify for protection against unlawful deduction from wages and unfavourable treatment associated with part-time working and for rights including a right to paid annual leave under the Working Time Regulations 1998 and a right to be accompanied at a disciplinary or grievance hearing. They are also protected from being penalised for 'whistleblowing'. 

Clyde & Co case – the facts

Ms Bates van Winkelhof (B) was a member of Clyde & Co. She was remunerated by both a fixed share of profit and an additional percentage. On 25 November 2010 she was dismissed by Ako Law, a firm with whom Clyde & Co was connected in Tanzania and with whom she worked. She was subsequently suspended by Clyde & Co on 26 November. Following an investigation she was expelled from the partnership on 13 January 2011. B brought whistleblowing and discrimination complaints against Clyde & Co on the basis that her expulsion had resulted from her reporting that the managing partner of Ako Law had been involved in money laundering and had paid bribes to secure work and affect the outcome of cases.

Clyde & Co argued in a pre-hearing review that the employment tribunal did not have jurisdiction to hear B's whistleblowing claim as she was not a worker. The employment tribunal agreed, though permitted the discrimination claim to proceed on the basis that it had the territorial jurisdiction to hear them. 

Although new territory for the courts as far as LLPs are concerned, applying a well-established interpretation of the statutory definition, the Employment Appeal Tribunal (EAT) decided that B was indeed a worker and, as such, was entitled to pursue her whistleblowing claim. The EAT looked particularly at her exclusivity with the partnership and the fact that, while a member, she was nonetheless in a subordinate position. The EAT upheld the employment tribunal's decision on territorial jurisdiction. 

The Court of Appeal decided that:

• the employment status of an LLP member depends what their status would have been if the LLP had been a traditional (ie 1890 Act) partnership;
• as a matter of law, a true partner in a traditional partnership can be neither a worker nor an employee; 
• therefore, if (on the facts) the individual would have been a (true) partner in the notional traditional partnership, he/she can be neither an employee nor worker in relation to the LLP;
• if, on the other hand, the individual would not have been a (true) partner in the notional partnership then they could be an employee or a worker – it's necessary to apply the usual test(s) to the facts.

B's whistleblowing claim can, accordingly, no longer proceed. However, the Court of Appeal confirmed that given her connection with the UK was "sufficiently strong" it was appropriate for the employment tribunal to hear her discrimination claim. 

The case will clearly be of significance for partners and LLP members. However, the judgment could have a wider impact. The Court of Appeal suggested that it is a condition of worker status that the alleged worker is in a subordinate position to the other party to the contract, despite this requirement not being explicitly set out in the definition of worker. The Court of Appeal's comments on this point were obiter but the same idea of the need for subordination underpinned its ruling that partners cannot be workers, which was very much part of the decision. 

The subordination point builds on a similar point made by the Supreme Court in the discrimination case of Jivraj v Hashwani [2011] UKSC 40, which concerned the definition of 'employee' in discrimination law. The issue may well be back before the Supreme Court next year as it seems B is applying for leave to appeal.

Simon Rice Birchall is a partner at Eversheds.