“… such a member cannot bring a whistleblowing claim (and would also be deprived of part-timer and equal pay remedies) …”

In a previous post I commented on the case of Bates van Winkelhof v Clyde & Co in which the Employment Appeal Tribunal found that an LLP member was a “worker” within the meaning of Section 230 of the Employment Rights Act 1996 and was thus entitled to pursue a whistleblowing claim.

The Court of Appeal has now reversed that decision, finding that an LLP member who (if the LLP had not been registered as an LLP) would have been a partner in an 1890 Act partnership, can be neither an employee nor a limb (b) worker. Thus such a member cannot bring a whistleblowing claim (and would also be deprived of part-timer and equal pay remedies).

With regard to jurisdiction of the English Employment Tribunal to hear the claimant’s sex and pregnancy discrimination claims (given that her principal place of work had been Tanzania), the Court of Appeal found that the connections to England were sufficiently strong to enable her to bring her claims in England.

This conclusion was based on the following facts:

• the claimant worked at least partly in Great Britain;
• the LLP Agreement was governed by English law;
• as a member of the LLP she agreed budgets with her partners in London;
• she visited London, for work, on a regular basis;
• she was mainly paid from London;
• all her time recording was done on Clyde & Co’s time recording system;
• all invoices generated, whilst put through the Tanzanian law firm, Ako Law, were generated from Great Britain;
• she was provided with administrative support from London (even though she had a secretary in Tanzania);
• she appeared on the Law Society website list of solicitors as a member of Clyde & Co;
• Clyde & Co’s press releases detailed her as being a member of Clyde & Co.

This decision is highly fact-specific, in other words each case has to be examined on its own facts to determine whether there is a sufficient connection to the English system of law to give the English Employment Tribunal jurisdiction to hear discrimination claims brought by foreign-based partners.

“… any partner or member who agrees to devote their full time and attention to the practice may well be a “worker” …”

The case of Bates van Winkelhof v Clyde & Co in the Employment Appeal Tribunal (“EAT”) has made new law, answering the question: can an equity member of an LLP be a “worker” for the purposes of the Employment Rights Act (“ERA”)? The answer, in brief, is yes. This decision has considerable implications for professional practices.

Miss van Winkelhof was an equity member in the LLP, entitled to a fixed annual share of profit. She was expelled following her dual report to the LLP management of (a) the fact that she was pregnant, and (b) alleged bribery by a member of an associated legal practice in Tanzania.

It was accepted that as an LLP member she was entitled to protection from sex discrimination. This case concerned whether she was entitled to “whistleblower” protection rights as a “worker”.

The EAT had no difficulty in finding that she was. The case turned on whether Ms Winkelhof’s work or services were “done or performed for another party to the contract” for the purposes of section 203(3) of the ERA. The contract concerned in this case was the LLP members’ agreement. That members’ agreement contained a provision to the effect that members were to devote their full time and attention to the LLP’s practice. This is a very common provision in professional practice members’ agreements and partnership agreements alike.

The EAT Judge relied on the test set out by Mr Justice Langstaff in Cotswold Developments v Williams, to the effect that, “… it seems plain that a focus upon whether the purported worker actively markets his services as an independent person to the world in general (a person who will thus have a client or customer) on the one hand, or whether he is recruited by the principal to work for that principal as an integral part of the principal’s operations, will in most cases demonstrate on which side of the line a given person falls …” Pointing out that Ms Winkelhof, “… by agreement, precluded herself from offering her professional services to anyone but the [LLP], let alone the world at large,” the EAT Judge concluded that Ms Winkelhof was a “worker”, and thus entitled to “whistleblower” protection.

The significance for professional practices is that any partner or member who agrees to devote their full time and attention to the practice may well be a “worker”. In consequence they would (amongst other rights) have the following rights:

• Not to suffer detriment by virtue of having made a “protected disclosure” (“whistleblowing”)
• As a part-timer not to be treated less favourably than a comparable full-time partner
• Equal pay for equal work

“… if the answer to any of these questions is, “No,” there may be a problem …”

Following the Supreme Court judgment in Seldon, how do professional practices quickly determine whether or not they should be taking advice on their current partner or LLP member retirement provisions, with a view to minimising the risk of age discrimination claims by partners/members in the future?

I have a checklist of 20 points to consider, but to keep it simple if the answer to any of the following 5 questions is, “No,” there may be a problem:

1. Do your provisions achieve inter-generation fairness or assist partners/members to retire with dignity?
2. Are you sure that there is no other way to achieve these aims?
3. Have you consulted with your partners/members and agreed what is fair?
4. Is your system of partner/member remuneration based on pure lockstep or fixed profit shares, without performance management or profit sharing based on performance?
5. If you have a compulsory retirement age, is it the best choice of age to achieve the aims referred to at 1 above, and can you state clearly why the chosen age is better than other ages for this purpose?

“… Most UK professional practices operate a system of inherently discriminatory compulsory retirement of partners at a fixed age, regardless of ability or performance, on the assumption that this is legally justified …”

The case of Seldon v Clarkson Wright & Jakes is due to be heard by the Supreme Court on 17 January 2012 in a hearing estimated to last three days.

The Justices (Lord Hope of Craighead, Lady Hale of Richmond, Lord Brown of Eaton-under-Heywood, Lord Mance of Frognal and Lord Kerr of Tonaghmore) will consider the correct approach to justification of prima facie direct age discrimination contrary to Regulation 3(1)(a) of the Employment Equality (Age) Regulations 2006.

The professional practices sector in particular has been awaiting the outcome of this long-running case with interest and perhaps some trepidation.

Most UK professional practices operate a system of inherently discriminatory compulsory retirement of partners at a fixed age, regardless of ability or performance, on the assumption that this is legally justified by the need to encourage younger members of the firm by making room for them at the top (the “dead man’s shoes” argument), and to avoid arguments as to whether or not older partners are still pulling their weight (the “collegiality” argument).

Mr Seldon, a partner in Clarkson, Wright & Jakes, a firm of solicitors, was compulsorily retired following his 65th birthday in accordance with the terms of the firm’s partnership deed. He brought a claim for unlawful direct age discrimination.

The Employment Tribunal decided that Mr Seldon had suffered less favourable treatment as a consequence of his age, but that the deed was a proportionate means of achieving certain legitimate aims.

The Employment Appeal Tribunal upheld the Employment Tribunal’s decision except that it found that the aim of “collegiality” did not itself justify fixing the compulsory retirement age at 65. The Employment Appeal Tribunal decided to send the matter back to the Employment Tribunal for it to reconsider the question of justification. Mr Seldon appealed the Employment Appeal Tribunal’s decision to the Court of Appeal. The Court of Appeal dismissed the appeal. Mr Seldon appealed to the Supreme Court.

It is uncertain whether the Supreme Court hearing will resolve all of the issues in the Seldon case itself, as the Employment Tribunal may be permitted by the Supreme Court to reconsider the issue of justification as it applies to the facts of that case, as originally ordered by the Employment Appeal Tribunal. By whichever route the Seldon case is to be finally determined, we can only hope that the Supreme Court will take the opportunity to offer clear guidance of more general application to all age discrimination cases where justication is in issue.

It may well be that once the outcome of the case is known it will be necessary for there to be a root and branch reassessment by professional practices as to how they deal with the issue of ageing partners. Some firms may be reluctant to abandon their traditional retirement practices, for the same reasons that have supported the justification argument to date, and may try to find ways around any tightening in the law. The result may be that with the hoped-for clarification we will see an upsurge in age discrimination claims by older partners.

Professional practices will be well-advised to study carefully the outcome of this month’s hearing, once judgment is handed down. A new round of debate amongst partnership practitioners will no doubt be followed by careful consideration by practices with their partnership law advisers as to how to redraft their deeds to ensure compliance with the law and avoidance of substantial claims.

“… most conduct that would have been sufficient to justify a discrimination or sexual harassment claim may well be oppressive and unacceptable and cause anxiety, alarm or distress …”

It is quite a common occurrence these days to find at the first meeting with a client that he or she has a perfectly good discrimination claim against the firm or LLP in which he or she has been a partner or member, but that the claim is barred by the very short limitation period (three months) applicable to discrimination and other claims in the Employment Tribunal. Such claims encompass discrimination on the grounds of age, race, nationality, religion (including the absence thereof), gender and sexual orientation, as well as sexual harassment.

It is pretty grim for someone who has a good claim under one or more of these heads, who has taken a bit of time to compose themselves after what may have been a traumatic ejection from their place of work, to find that they have no remedy in the Employment Tribunal because they have left it too long.

However, all may not be lost. The civil remedy under section 3 of the Protection From Harassment Act 1997 is often available to a potential discrimination claimant. The harassment cause of action has a limitation period of six years. Its ambit goes far beyond discrimination.

In order to establish such a claim against one or more partners or members or an LLP, the claimant has to prove the following:

1    The defendant(s) pursued a course of conduct (on at least two separate occasions) which:

a    amounted to harassment of the claimant; and

b    The defendant knew or ought to have known (an objective reasonable person test is applied) amounted to harassment of the claimant; and

2    The conduct was oppressive and unacceptable.

The above of course begs the question what is harassment.  Harassment means causing anxiety, alarm or distress.  Unlike a personal injury claim it is not necessary to demonstrate psychiatric injury (or negligence, or foreseeability).

Conduct includes speech, but the speech must go beyond “the ordinary banter and badinage of life”.

There is no requirement for other illegality.  Therefore the harassment does not have to be capable of amounting to a criminal act other than harassment, or another tort.

Harassment does require conduct outside the norm.  That said, most conduct that would have been sufficient to justify a discrimination or sexual harassment claim may well be oppressive and unacceptable and cause anxiety, alarm or distress.

Each case of course turns on its own facts, but as management regimes grow tougher in the poor economic climate, practices need to consider carefully what is and is not acceptable conduct in the drive to “incentivise” partners/members.

Few would doubt that what might be characterised as bullying of one sort or another does take place between partners in some firms, even in professional practices, whether by way of autocratic rule, offensive office banter, strategic manoeuvring, or opinion-shaping or other forms of “ganging-up”.

Personal damages (for anxiety, etc) and actual financial loss can be recovered, and there is no limit.  The usual requirements of mitigation apply, but subject to that it is open to partner and LLP member claimants to recover very substantial sums.  In one of the leading cases, which was an employment case involving long-term bullying, which resulted in two nervous breakdowns, the recovery was in excess of £800,000 plus legal costs.

In many cases there may well be a cross-over or overlap between harassment and the duty of good faith.  However, in many LLP environments the duty of good faith may well not apply, even by implication, and in others it may be expressly excluded under the members’ agreement.  Also, breach of the duty of good faith is unlikely to give rise to the ability to claim damages for non-financial injury (at least not without establishing psychiatric injury).  There may be types of conduct which arguably engage only one of these causes of action, so unless there is good reason to do otherwise one should consider pursuing harassment and breach of the duty of good faith in tandem.