Landmark judgment: protection for members of LLPs who blow the whistle - Employment Update June 2014

The landmark judgment in the case of Clyde & Co LLP & another v Bates van Winkelhof [2014] UKSC 32 was handed down by the Supreme Court on 21 May 2014. Notably, it was held that a member of a Limited Liability Partnership does fall within the scope of a "worker" for the purposes of section 230(3) Employment Rights Act 1998 (ERA), and therefore members enjoy the statutory protection from detriment available to all whistleblowers.

The Facts

The facts of the case involved a former equity partner of law firm Clyde & Co LLP, who had been seconded to work for Ako Law, Clyde's association law firm, situated in Tanzania.

It was alleged by Ms Bates van Winkelhof that she had been expelled from the partnership for whistleblowing. In late November 2010, she reported to Clyde & Co that the managing partner at Ako Law had admitted to paying bribes to secure work. These allegations were denied by Clyde & Co. The next day she was dismissed by Ako Law and suspended by Clyde & Co.

The key aspect of Ms Bates van Winkelhof's claim was that she had suffered detriment for the purposes of s47B(1) of ERA on the grounds that she had made protected disclosures about Ako Law.

Following a lengthy progression through the tribunals and the Court of Appeal, it was held by the Supreme Court that a member of an LLP was entitled to the statutory protections afforded to a "worker", including protection from suffering detriment for whistleblowing.

The Implications

The implications of this case could be far-reaching and prove instrumental in the way LLPs are run in the future. LLPs are going to have to address the risk of disgruntled members blowing the whistle and bringing an employment tribunal claim, for which there is no cap on the amount of compensation that a successful claimant may be awarded.

The positive outcome of this case is that it serves as an incentive for LLPs to implement robust whistle-blowing procedures and take a close look at their internal governance. However, the concern is that the upshot is that it will open the floodgates to members bringing whistle-blowing claims out of malice or discontent when they are unhappy about a difficult decision being taken within the partnership, perhaps to restructure or remove particular partners.

Members are "workers"

The implications of this case, however, are not limited to partners of LLPs just enjoying protection under whistle-blowing legislation. The fact that the Supreme Court has definitively ruled that members of LLPs fall within the definition of a "worker" means that they will also be entitled to other rights such as paid annual leave (which now is now likely to be calculated on a worker's entire "normal" wage, including commission, rather than just their basic pay), auto-enrolment on a pension scheme and certain limits on working time (including rest periods and maximum weekly working time).

The additional administrative and financial burdens on LLPs are likely to be significant and this case is likely to result in a shift in practices in LLPs.

A copy of the judgment can be accessed here.

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