Clydes judgement will push firms to review membership agreements, say lawyers
Law firms may need to re-think their partnership agreements and structures in light of the Supreme Court judgement on LLP whistleblowing, according to a number of employment lawyers.
May 21, 2014 at 08:36 AM
4 minute read
Law firms may need to re-think their partnership agreements and structures in light of the Supreme Court judgement on LLP whistleblowing, according to a number of employment lawyers.
The ruling found that limited liability partnership (LLP) members have the same protection as employees in whistleblowing cases.
Weightmans' employment partner Phil Allen said that while the judgment would be welcomed "as a move towards greater transparency in the corporate world", the decision could cause uncertainty for LLP-structured businesses.
The judgment follows a case brought by former Clyde & Co partner Krista Bates van Winkelhof, who alleges she was dismissed for blowing the whistle on the managing partner of Clydes' Tanzanian associate firm.
"Members being workers raises the possibility of wider rights," said Allen, who said contracts, agreements and other key documents may need re-drafting. "As they are to be defined as 'workers' LLP members may be entitled to receive paid annual leave or to be auto-enrolled in a pension scheme – a potential administrative nightmare.
"Many lawyers will be surprised and alarmed at this ruling. Due to the typical lack of subordination or hierarchy in the relationship of LLP members/partners, the prevailing view had previously been that LLP membership and worker status were effectively inconsistent.
"We now know that LLP members can bring claims if they allege they have been subjected to a detriment because they spoke out."
Ashurst's head of employment Caroline Carter said the decision may impact the way LLPs structure and manage their memberships.
"Whistleblowing claims are uncapped and can be brought in a large number of circumstances, so we would expect such claims to be raised by sizeable numbers of disgruntled LLP members as they exit, or are removed from, LLP arrangements."
Addleshaw Goddard managing associate Annabel Mackay suggested LLPs will now need to ensure they have formal whistle blowing policies and processes for all members.
"The effectiveness of any policy should be monitored closely," says Mackay. "What is important is to create a culture where subjecting a whistleblower to any detriment will have serious consequences."
"Without a proper policy in place, LLPs may now face claims for uncapped damages by member whistleblowers, with all the reputational damage and cost that this entails. The cost of this is immeasurable."
GQ Employment Law partner Darren Isaacs said the decision has the potential to cause "a significant headache to management teams".
"We should expect to see an increase in whistleblowing disputes arising out of limited liability partnerships, which will be exposed to a higher risk of claims from disgruntled partners," Isaacs argued.
"Large law firms and accountancy firms with international affiliates could also be at risk of facing whistleblowing claims in the UK Employment Tribunal from partners at local offices in countries with a completely different employment culture from the UK."
Others welcomed the ruling by the Supreme Court, with Michelle Chance, a partner in Kingsley Napley's employment and partnership practice, calling it "good news for both LLPs and LLP members".
"LLP members have access to financial documentation and management information that most employees would not see, and are therefore more likely to be aware of wrongdoing than more junior members of staff.
"LLPs should encourage a culture of compliance and transparency in which members are valued for doing the right thing and bringing wrongdoing to their firm's attention, so that it can be dealt with early on and stamped out."
Chance also said the decision bridged the gap between members' protections against discriminatory treatment, and so it was therefore consistent to extend the protections to whistleblowing.
"This is a sensible decision that is consistent with the trend to ensure those who raise concerns are protected against retaliation," added Linklaters' employment partner Nicola Rabson.
For more, see Clydes' dismissal case: Supreme Court rules LLP members have whistleblower protection.
- The full judgement can be found here
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