27 September 2012

Whistleblowing partners lose their rights

The protection against whistleblowers being subjected to a detriment is an important one.  People who dare to stand up and point out regulatory breaches, accounting frauds, misleading clients or investors, health and safety risks, damage to the environment etc are deserving of protection but no such protection exists if they are members of an LLP.In a previous blog, I wrote that a member of an LLP who was in 'a subordinate relationship' was deemed to be a 'worker' and could bring a whistleblowing claim. This was based on the decision of the Employment Appeals Tribunal in the case of Clyde & Co v Van Winkelhof.  That decision has now been overturned by the Court of Appeal and I shall have to go back and amend my earlier blog – a minor inconvenience compared with the injustice this presents for many junior 'partners'. An employee dismissed for being a whistleblower can complain to an employment tribunal and, if successful, obtain compensation for financial loss and, often, injury to feelings.  A member of an LLP expelled in accordance with the contractual terms of the LLP agreement can now make no such complaint. Often, LLP agreements allow members to be expelled without cause on three months' notice; scant protection indeed. The Court of Appeal held that, as long as a member of an LLP would have been treated as a partner in (an old, unlimited) partnership, he cannot also be treated as a 'worker' with the protection that status brings.  This ignores the fact that, in the modern world, especially in financial services institutions, many former employees are made members of an LLP just to save National Insurance.  They are required to put in some nominal capital (to make them appear to be partners) and are given some minor management rights but are, to all intents and purposes, subordinate to the real partners. I don't really care whether the Court of Appeal decision was right in law; I think those working in a modern LLP deserve workers' rights, especially now we know how important it is for those working in financial services to speak up when they see wrongdoing.  Maybe there will be an appeal to the Supreme Court…

Category: Blog