whistle-blowers’ protection for LLP members

The decision of the Employment Appeal Tribunal in Clyde & Co LLP v Winkelhof [2012] UKEAT 056 holds that limited liability partnership (LLP) members may be "workers" for the purposes of whistle-blowing protection, even if they are remunerated in part by a profit share. The case concerned an equity member of a LLP who worked in part in the UK and in part for an associated firm in Tanzania. She was expelled from the partnership after she made allegations of bribery and corruption against associated Tanzanian firm AKO Law’s managing partner, Kibuta Ongwamuhana. She made a complaint that her expulsion was detrimental treatment on the ground of a protected disclosure. She also made complaints of sex discrimination and pregnancy discrimination.

At a preliminary hearing her claim was rejected because she did not fall within the definition of a "worker" and was therefore not entitled to protection. The Employment Appeal Tribunal overturned this decision, concluding that she fell within the definition of a worker, that is a person working under a contract "to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual". Although, for some of the time, the claimant was working on her own account, when she did so, the respondent partnership was not her client.

The question also arose whether the tribunal had jurisdiction to hear her claims under the Equality Act 2010 (which specifically covers partners) when she worked partly in Tanzania (she had spent 78 days of the year in London).


organised groupings are not just a matter of happenstance

Another TUPE case this month highlights the need for an "organised grouping of employees" in a service provision change case which has as its principal purpose the carrying out of the activities concerned on behalf of the client.

In this March’s decision in Eddie Stobart v Moreman and others it was held by the Employment Appeal Tribunal that employees who spent the majority of their time working for a particular client were not an organised grouping for the purposes of the TUPE Regulations.

Issues concerning the identification of an "organised grouping" have returned quickly in the shape of the latest EAT decision on the point. In Seawell Ltd v CEVA Freight (Uk) Ltd & Anor Ceva had a contract for the storage and supply of materials to Seawell for use on the oil platforms they operated. Mr Moffat worked for Ceva, and spent all his time on their contract, and a number of other Ceva employees spent varying amounts of time on Seawell work, but most of their time on other clients’ work. Seawell took the work back in house and ended the contract. Ceva maintained that there was a service provision change, and told Mr Moffat to report to Seawell after the changeover, but Seawell would have none of it, and Mr Moffat found himself without a job. He succeeded in an Employment Tribunal claim against Seawell but failed on appeal.


early retirement benefits transfer under TUPE

In any business sale, the buyer and seller are concerned to be as sure as they can be that rights and obligations will transfer to the buyer under TUPE – and in areas where there is doubt, will usually provide for an indemnity by the seller for any rights not accounted for in the purchase price. Generally, pension schemes fall outside the scope of TUPE, but parts of pension schemes which are not "benefits for old age, invalidity or survivors" do transfer.

In 2007 Procter & Gamble sold part of its business to Svenska Cellulosa Aktiebolaget SCA with employees based at its Manchester manufacturing site transferring to SCA under TUPE. The transferring employees were participating members of the Procter & Gamble pension fund, which allowed for early retirement benefits. There were no indemnities in the sale and purchase agreement, and SCA were very clear that they didn’t want to take on any pension liabilities. After the sale the question arose whether some early retirement benefits under the P&G scheme, which had a normal retirement age of 65 but allowed early retirement from age 55 transferred or not. There was no argument at all that TUPE did not apply – and the High Court therefore had to consider whether these benefits were excluded from TUPE with the standard old age retirement pensions or not.


what are “settlement agreements” and how, if at all, do they differ from compromise agreements?

During the second reading of the Enterprise and Regulatory Reform Bill on 11 June Vince Cable announced that the Government wants to promote and increase the use of agreements relating to the termination of employment as an alternative to employment tribunal proceedings. No details were provided but the intention is to "ensure that the offer of a settlement cannot be used against an employer in an unfair dismissal case". But, hang on, isn’t that what a compromise agreement under the current legislation does and are these new settlement agreements going to be confined to unfair dismissal claims?

It has been suggested that, for small employers, there will be no need to obtain legal advice. But small employers do not need legal advice as matters stand: it is employees who must obtain advice in order for an agreement to be binding. Clearly, employees might not know whether a proposed settlement is fair and reasonable given the circumstances and the requirement to obtain legal advice is intended to address this understandable lack of knowledge. However, the Government has suggested that employees will continue to enjoy full employment protection because they can reject a settlement offer and proceed to an employment tribunal.


after the fuss about Beecroft – what are the real changes likely to come into effect?

The pace of change never gets any slower in employment law, and I have quite a few consultations and proposals to report. It remains to be seen how many of them will become law, and in what form, but after a couple of well publicised retreats over the budget, and the leaking of the Beecroft Report in advance of its release in slightly different terms, perhaps a considered and thoughtful approach will be taken to them.

I should first confirm what is not happening. The key proposal in the Beecroft report for "compensated no-fault dismissals" has been omitted from the Enterprise and Regulatory Reform Bill which is currently making its way through the Commons. Instead, a clause proposing "new" voluntary settlement agreements (compromise agreements under another name and about which more below) has taken its place and most people are regarding that as the quiet death of Mr Beecroft’s proposal.

It is known that of 135 businesses consulted only 38% were in favour of the proposals which most considered to be unnecessary. Many have commented in the press that they have far more important things to worry about at the moment.

The strength of feeling about Beecroft’s contribution was demonstrated particularly well by an article in The Times (behind paywall) which described the report as "short on evidence and long on recommendations – and the prejudices of its author are never far from view" and this was why it was “leaked, published and strangled at birth in a matter of hours".

So what is to be expected?


The end of the Beecroft Review

From Hansard: Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Will the Secretary of State give the House categorical assurances that this House and the other House will not use the Bill to include the recommendations of the Beecroft review, with specific reference to sack-on-the-spot? Vince Cable: I can give a categorical assurance. Of course, as…


bonus payments: beware what you say

Managers at Germany’s second largest bank, Commerzbank, are facing the prospect of having to find £42million after Mr Justice Owen, sitting in the High Court in London, held that 104 former City bankers at Dresdner Kleinwort are each entitled to bonus payments of up to £1.3million each.

The Bank claimed to be entitled to withhold payments when it faced massive financial pressure as part of the general turmoil in 2009. In 2008 the business was struggling and in May it was put on the FSA’s "watch list" as a result of the apparent fragility of its business. With a view to avoiding mass defections resulting from the instability this caused CEO Dr Stefan Jentzsch promised at a meeting that there would be a 400 million euros’ guaranteed bonus pot. This was a verbal representation to the employees concerning what was described as a discretionary bonus scheme.

In early 2009 the Bank decided to reduce the resulting allocated bonuses by 90%.


is a lap dancer an employee?

The Employment Appeal Tribunal has considered the employment status of a lap dancer, Nadine Quashie, who worked at a Stringfellows club. She had made a claim for unfair dismissal, which had been rejected by an employment tribunal on the ground that she was not an employee and therefore not entitled to claim. Overturning this decision, the EAT looked at the three essential elements of an employment contract – the obligation to carry out work personally, the element of control over work by the employer, and mutuality of obligation and found all of these were present.


guidance on costs orders

Two cases this month look at the question of costs orders. Rogers v Dorothy Barley School was an unsuccessful breach of contract claim brought by a school caretaker. Representing himself, he alleged that the school were in breach of contract when he received a water bill, in error, in respect of the house he occupied at the school. Although he did not have to pay the bill, he felt that it was a breach of contract that he had received it at all. He was unsuccessful on the grounds that the tribunal had no jurisdiction to hear the claim, because it can only deal with breach of contact claims where the contract has ended.
He appealed the tribunal decision, again without success, and the school made an application that he should pay its costs.


resignation “with immediate effect” takes immediate effect

Horwood v Lincoln County Council is a useful reminder that although the parties to a contract can, between them, agree to change the end date of a contract, bringing it forward and or putting it back, that cannot displace the effective date of termination as defined in the Employment Rights Act 1996 s. 97, which is crucial for calculating time limits for bringing employment claims.
Ms Horwood wrote a letter of resignation to her employer in response to what she said were defects in a disciplinary process applied to her and her subsequent demotion, claiming that these amounted to constructive dismissal. Her letter stated that she wished her resignation to have "immediate effect".