Insights - The Supreme Court Re-defines the Meaning of “Worker”

Employment & Discrimination - Spencer Keen

The definition of worker in s.230(3) Employment Rights Act 1996 (ERA 1996) provides that a worker is an individual who has entered into or works under:

  • a contract of employment; or
  • any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform work personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.

This definition is important because of the number of statutory protections that apply to workers as well as to employees.  One such right is the right not to be subjected to a detriment because you have made a "protected disclosure" (section 47B(1), ERA 1996).

In Clyde & Co LLP and another v Bates van Winkelhof the Supreme Court has allowed an appeal against a decision that an equity partner in a limited liability partnership (LLP) was not a worker and could not therefore bring a whistleblowing claim.   The Court’s decision has a significant consequences for the definition of “worker” under s.230(3) ERA 1996.

Background

The claimant was working in a firm called Shadbolts but became an equity partner of Clyde & Co LLP in February 2010 after Clyde & Co acquired the part of Shadbolts in which she was working.   Clyde & Co's partnership is divided into two types:  equity members who receive a guaranteed level of remuneration and a further sum related to the profit of the firm; and senior equity members who are remunerated by a share of profits only.  The claimant was the former.

During the relevant time the claimant was seconded to a firm called Ako Law.  In November 2010 she reported to Clyde & Co that the managing director of Ako Law had told her that he had paid bribes to secure work and favourable outcomes to cases.  She alleged that she was dismissed by Ako Law and subsequently expelled from Clyde & Co's partnership because of these disclosures. She made a complaint of whistleblowing and sex discrimination.

The Tribunal and EAT

At a pre-hearing review an employment tribunal held that it did not have jurisdiction to hear the claimant’s whistleblowing claim because the claimant was not a worker.  However, the tribunal held that it did have territorial jurisdiction to hear the discrimination claims that the claimant made in her capacity as a partner.  The claimant appealed against the finding that she was not a worker and Clyde & Co cross-appealed against the finding that the claim was within the tribunal’s territorial jurisdiction.

The EAT allowed the Claimant’s appeal on worker status but dismissed Clyde & Co's appeal on territorial jurisdiction.  Clyde & Co appealed to the Court of Appeal.

The Court of Appeal

The Court of Appeal allowed the appeal on worker status.  Applying Tiffin v Lester Aldridge LLP [2012] IRLR 391 Elias J held that the claimant would have been a partner if she had not been a member of an LLP because, amongst other things, she had rights to participate in the running of the business and was carrying on a business in common with a view to profit.  Elias J held that s.4(4) of the Limited Liability Partnerships Act 2000 applied with the effect that the claimant could not be considered a worker.  Elias J also highlighted two particular reasons why he considered that partners could not have worker status:

  • firstly, a legal reason: “since the partnership is 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. He would be both workman and employer which is a legal impossibility” (paragraph 63)
  • secondly, a sociological reason: “the very concept of employment presupposes as a matter of sociological fact a hierarchical relationship whereby the worker is to some extent at least subordinate to the employer…  Where the relationship is one of partners in a joint venture, that characteristic is absent. ….There is lacking the relationship of service and control which is inherent in both concepts of employee and limb (b) worker. The partnership concept is the antithesis of subordination.” (paragraph 64)

 

The Court of Appeal rejected Clyde & Co's cross appeal on territorial jurisdiction.  Clyde & Co argued that the tribunal should have compared the claimant’s employment connection with Great Britain to its connection with Tanzania. The Court of Appeal held that a comparison was only appropriate in circumstances where an individual works wholly abroad.  In those circumstances there must be powerful reasons to grant territorial jurisdiction to a tribunal in Great Britain.   A comparison and evaluation of the connections between Great Britain and the overseas place of work will be required to demonstrate "why the displacing factors set up a sufficiently strong counter-force".

Where an individual lives or works for at least part of the time in Great Britain the only requirement for finding that a tribunal in Great Britain had jurisdiction was that the connection be "sufficiently strong" to make it appropriate for the tribunal to deal with the claim.

The Supreme Court

The claimant appealed the Court of Appeal’s decision that she was not a worker.  The Supreme Court allowed the appeal.  Baroness Hale, giving the leading judgment, held that a member of an LLP  has worker status under s.230(3)(b) ERA 1996 and thus is entitled to be protected from being subjected to a detriment under the whistleblowing provisions.   Section 4(4) of the LLPA 2000 did not affect that position.

Baroness Hale noted that employment law distinguished between two types of self-employed persons:  those providing their services personally but who are working on their own account, and those providing their services personally but who are not working on their own account.  Generally the former has not been considered a worker whereas the latter has.  However, Baroness Hale cautioned against drawing a rigid distinction between these two types of self-employed persons.  She emphasized that the focus must be on the words of the statute and there that was not a “single key to unlock the words of the statute in every case.”  She also stated that the fact that a person was in business on his/her own account was not itself conclusive since the definition in s.230(3)(b) ERA 1996 also required the party receiving the services not to be a client or a customer.  The mere subordination of one person to the control of another, while often a key question, was not a freestanding, universal characteristic of a worker.

In this case the Supreme Court held that the claimant was a worker:  she could not market her services as a solicitor to anyone other than the LLP, she was an integral part of their business and the LLP was in no sense her client or customer.

Comment

Many employment lawyers will agree with Mr Recorder Underhill QC’s distinction in Byrne Bros (Formwork) v Baird [2002] ICR 667 between on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other, contractors who have a sufficiently arm’s length and independent position to be treated as being able to look after themselves in relevant respects.  For practitioners this has frequently been the key to both understanding why certain self-employed people are protected as workers and identifying whether or not a person is a worker.

By retreating to the strict wording of the statute it is possible that the Supreme Court has dramatically broadened the number of persons entitled to claim worker’s rights.  Using the Supreme Court’s reasoning a senior equity partner in a law firm could argue, not unreasonably, that he was a worker:  a proposition that would have been given short shrift before this case.

This is an interesting decision and, given the number of rights now afforded to workers, it has potentially significant ramifications for many organisations who employ people to provide work personally.

 

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