Following the recent dismissal of an appeal by the Employment Appeal Tribunal and also by The Court of Appeal recently, Madeleine Thomson, Head of Employment Law at Hamlins LLP, considers whether partners in professional partnerships can claim employment status.
Establishing an individual’s employment status is crucial in determining his or her statutory rights, which differ significantly depending on whether he or she is an ‘employee’ or ‘worker’, or has some other status, such as independent contractor or partner.
Many employment protection rights, such as the right to claim unfair dismissal, are only available to ‘employees’ within the meaning of the Employment Rights Act 1996. Whether an individual is an employee depends on an analysis of the features of the contract under which he or she works.
There are different categories of “partner” in professional practices such as law, accountancy and property agent firms. It is not surprising then that when such a lowly category of partner loses their job, they argue that they are employees in order to claim compensation for unfair dismissal.
Earlier this month Mr Tiffin, a former solicitor and member of limited liability partnership Lester Aldridge LLP (LLP), brought various complaints against the LLP including claims for unfair dismissal and breach of contract which relied on his having employment status. The Employment Tribunal upheld the LLP’s argument that Mr Tiffin was not an employee and therefore the Tribunal did not have jurisdiction to hear his claims.
This case is of relevance to limited liability partnerships of all types, including law firms, accountancy firms, property management firms, architectural firms and others.
Although Mr Tiffin appealed to the Employment Appeal Tribunal (EAT) on the grounds that the Employment Tribunal had made a perverse finding in concluding that he was not an employee, his appeal was dismissed by the EAT, and subsequently dismissed by The Court of Appeal.
So when does a “partner” have employment status?
The starting point in determining whether Mr Tiffin had employment status was to establish whether he was in fact a partner. As this test was satisfied he could not be an employee.
In the event that partnership status cannot be determined, there are a number of factors that the tribunal would assess, indicating a contract of service granting employment status, including personal service, mutuality of obligation and control.
Other factors which may be relevant in some circumstances include whether the individual is paid a fixed salary or wage, the degree of financial risk adopted by the individual, the extent of the individual’s investment in and management of the business, and whether the individual is paid when absent for sickness or holiday.