UK: LLPs & Partnerships - Employment Status Of 'Partners'
Last Updated: 27 March 2017

Transcript

Siobhan Bishop: Welcome to the first of our series of three podcasts on LLPs and Partnerships.

The first topic today, in this podcast, is the employment status of partners and LLP members. I'm joined by Tessa Livock, a principal associate in our Employment, Labour & Equalities team at Gowling WLG. These issues will be relevant to all sectors dealing with setting up and operating a business through an LLP structure or partnership as well as individual LLP members who need to understand their rights and obligations and how they might want to exit such a structure.

So firstly, Tessa, we will look at the extent to which employment status applies to partners and LLP members. There's a misconception that partners and LLP members can't have any employment rights.

Tessa Livock: Yes, that's right. The traditional view is that partnership and employment are mutually exclusive but, actually, partners and members may have rights not traditionally associated with partnership. It is probably fair to say that tribunals are showing an increasing willingness to find partners and LLP members do enjoy some employment rights. The increasing size of partnerships and LLPs and changes to the way that they're run, for example, more complex management structures and the use of committees, may mean that many LLP members particularly, for example, salaried or fixed share members or partners may be closer to employees than to genuine business owners.

Siobhan: So why does this matter? What are the risks with all of this?

Tessa: Well, of course, there's the potential financial exposure if a firm or LLP is subject to legal claims from partners or members asserting employment rights. Compensation for some claims that may be available to partners, such as discrimination or whistleblowing claims is unlimited, but as well as the financial aspects there's a risk and reputation issue. The press generally are more interested in partner spats than say regulatory or technical breaches and so there is potential for adverse publicity.

Siobhan: So, even if someone is not an employee they may still have valuable rights?

Tessa: Yes, that's right. Even if they are not employees they may be workers and have valuable employment protections, for example, they may be protected as whistleblowers, they may be protected from discrimination and they might have other rights that you would be forgiven for assuming do not apply to partners or LLP members, such as the right to paid annual leave or protection under the part time worker regulations or minimum wage protection.

Siobhan: So what about the LLP or partnership deed itself, is there any way that can override these rights?

Tessa: Importantly not, it isn't possible to contract out of statutory employment rights without entering into a settlement agreement which complies with certain formalities and on which the individual has the chance to take independent legal advice. So, if a partner or member has employment rights, their rights to bring claims may override the provisions of the deed including any provisions around compulsory dispute resolution.

Siobhan: Okay, so in deciding whether someone is an employee or indeed a worker, employment tribunals will look at all the factors in the round. But what are the really important factors when looking at the status of these individuals?

Tessa: There's a wealth of case law on what constitutes employment or worker relationship. It is clear that partners in a traditional partnership can be employees, there are conflicting authorities on whether LLP members can be employees. But it is clear that LLP members, as well partners, can be workers. And when looking at the status of partners and members, bearing in mind the established case law tests for whether there is a contract of employment, factors relating to control and financial risk are probably the most relevant as these vary a great deal from firm to firm and as between partners. So, you might consider does the person have a genuine stake in the performance of the firm? The greater the financial risk to the partner or member, the more this will point away from them being an employee. So it might be that salaried partners or fixed share partners are more likely to have employment rights but that won't necessarily preclude full equity partners from having employment rights if the rest of their arrangements are enough to indicate employment or worker status.The level of control by the firm over the individual in the form of performance targets, handbooks and disciplinary or holiday provisions and other management sector requirements will also be relevant, as will an individual's participation in management as a business owner, for example, what's the extent of their voting rights? How may firms allow partners to vote on all of the matters set out in the partnership deed as opposed to just a few significant events in the life of the firm? The question of voting rights is really important because it goes to the equality of bargaining power between the member and the firm. How many professionals on becoming a partner or member read the partnership deed or agreement and assume that they can put forward any amendments? Most partners will be integrated into the business of the firm and held out as a partner on its website and in its documentation.

Siobhan: So can LLPs and partnerships structure their business in a way to avoid the individuals gaining employment status?

Tessa: Yes, potentially, having regard to some of the factors that we've talked about. But, in many cases, it may not be practicable for professional firms to try to avoid members acquiring status and rights. The efficient running of the firm will often trump the need to try to structure arrangements with partners or members so as to avoid them having employment rights. But it is really important to understand where those rights might arise in order to be able to identify where people enjoy those statutory protections.

Siobhan: So the reality is that it is often quite difficult, especially for larger professional firms, to avoid employment status?

Tessa: Yes, that's often the reality.

Siobhan: Okay, so how can organisations minimise their risks in this area then?

Tessa: Well the factual circumstances in which claims might be raised vary hugely, but I think it is possible to make a few general recommendations. It is clear partners already have considerable and valuable employment rights and the direction of travel is towards increasing protection for partners and LLP members. So I suppose the first point is don't assume that they don't have any employment rights in the way that you deal with them. In fact it is better to assume that they will be protected from discrimination, so the processes and measures that you have in place to ensure your firm is a discrimination free workplace, might need to be adapted, as far as possible, to be applied to partners as well as the rest of your staff. Partners may also have whistleblowing protection and you should avoid automatic refusals of employee type requests, such as flexible working. Although that is a right that is available to employees if you refuse to consider requests based on status alone there's a risk you will be faced with indirect discrimination arguments. So I think the key thing is to treat partners equally and consistently and above all with dignity.

Siobhan: Thank you very much Tessa. As we mentioned at the beginning this is the first of our series of three podcasts. The second podcast with Martin Chitty a partner in the team will discuss what happens when someone wants to leave the partnership or LLP. And finally, in the third podcast, Jonathan Chamberlain, another partner in the team, will cover team moves, including international team moves and getting compensation for damage caused.

We hope you found this podcast useful and if you have any questions on the topics we have covered today, or generally, please don't hesitate to contact Tessa, Martin or Jonathan and they would be delighted to help you.

Thank you.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Press Releases from this Firm
Recent Content from this Firm
By Georgi Paskalev (Articling Student), Benoit Yelle
By Ian Chapman-Curry
By Helen Davenport
By Suzanne Sabourin
By Megan Martins
By Chris Brierley, Catherine Phillips
By Lewis Retik
By Ronald Doering
By Jake Huang, Jamie Rowlands
By Roberto Aburto, Sarah Willis
Tools
Print
Font Size:
Translation
Channels
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.