UK Supreme Court Rules That LLP Members Benefit From Whistleblower Protection

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The UK Supreme Court has ruled in Clyde & Co LLP and another v Bates van Winkelhof that members of Limited Liability Partnerships (LLPs) are to be treated as “workers” and therefore are covered by the protections which UK law provides for whistleblowers.

The case

Ms Bates van Winkelhof, a partner at London-based law firm Clyde & Co, claimed that she was forced out of the firm having “blown the whistle” on the managing partner of the firm’s Tanzanian associate firm. She reported that the managing partner had engaged in bribery and money laundering, was dismissed from the Tanzanian associate firm, and was suspended and finally expelled from membership of Clyde & Co LLP.

To be eligible for the protection afforded to whistleblowers under the domestic employment legislation, Ms Bates van Winkelhof needed to show that she was a “worker” for the purposes of the Employment Rights Act 1996, either by being an employee of the LLP or, to paraphrase, by working for the LLP under a contract to perform services personally where her services were not being provided to the LLP as a client of a business operated by her.

In a judgment released on 21 May 2014, the Supreme Court had no problem in finding that LLP members constitute workers for the purposes of the Employment Rights Act 1996 and are therefore eligible for domestic whistleblowing protection. In essence, LLP members satisfy the statutory definition of workers because they provide personal services to the LLP and do not do so in the course of their own business because they are part of the LLP.

This conclusion was seen as consistent with the underlying policy of the whistleblowing legislation, not least given its potential relevance in the regulated financial services and legal sectors where LLP arrangements are common. Prior to this decision, LLP members had less protection than the employees of the LLP in relation to whistleblowing, even though those members might be more likely in practice to be aware of, and prepared to blow the whistle on, malpractice.

Impact

The extension of whistleblowing legislation to LLP members is potentially very significant given the unlimited compensation which can be awarded for financial loss in successful claims and the reputational and other aspects of whistleblowing litigation. An LLP member who can demonstrate that he or she was removed from the LLP or otherwise subjected to detrimental treatment – such as reducing remuneration and other adverse treatment - because of whistleblowing will be entitled to uncapped compensation for losses suffered as a result. In areas where the use of LLPs is prevalent, such the financial and professional services sectors, the financial exposure to a successful whistleblowing claim from a highly remunerated LLP member could be very significant indeed. This exposure is in addition to the existing ability of LLP members to claim unlawful discrimination under the Equality Act 2010, breach of which also gives rise to potentially unlimited financial awards.

LLPs will therefore need to ensure that their internal whistleblowing procedures now cover their members if they do not do so already. If circumstances arise that could constitute whistleblowing for the purposes of the legislation, an LLP will need to be particularly careful not only to deal with those concerns properly but also to ensure that its subsequent treatment of the member in question is appropriate and objectively justifiable.

Whilst this decision is potentially very important for LLPs, it should not be forgotten that, for a claim to be successful, the various specific requirements of the whistleblowing legislation need to be satisfied and that certain important amendments were made to the whistleblowing legislation in 2013 which more tightly delineated the scope of whistleblowing protection. These changes included the introduction of requirement that the individual be able to demonstrate a reasonable belief that the disclosure in question was in the public interest and the removal of the requirement that the disclosure be made in good faith. (Whether or not a whistleblowing disclosure was made in good faith is now relevant only to compensation in a successful claim). Notwithstanding these changes, particularly in regulated environments, the potential exposure to highly damaging and valuable claims is nonetheless clear.

This decision is not just important in establishing that LLP members are covered by the whistleblowing legislation. Now it is established that they are workers, LLP members will also enjoy rights and protections conferred on workers under the legislation governing, amongst other things, the national minimum wage, working time, the protection of part-time workers and unlawful deductions from wages. This last point means that "clawback" provisions, where required, need to be carefully drafted and apply to the relevant individuals.

 

Topics:  Employee Definition, Limited Liability Partnerships, UK, Whistleblower Protection Policies, Whistleblowers

Published In: Civil Rights Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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