Mark Shulman, Consultant Solicitor at Keystone Law

WORKER STATUS
Can a member of a limited liability partnership be a worker within the meaning of Section 230 of the Employment Rights Act 1996 and therefore pursue a whistleblowing claim? In Clyde & Co LLP & Anor v Bates Van Winkelhof, the Court of Appeal decided that being an LLP member does not of itself confer worker status. The facts of this case were reported in our June case round-up.

Section 230(3) of the Employment Rights Act provides:

"In this Act "worker"…means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(a) …

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes 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;

and any reference to a worker's contract shall be construed accordingly."

The LLP contended that the EAT should have relied upon various items of evidence which demonstrated that when all factors were weighed in the balance, the finding that the Claimant was in a subordinate position with respect to the LLP (and therefore had worker status) was unsustainable.

The LLP’s second ground raised an issue which had not been advanced in previous hearings. The contention was that the Claimant could not be a worker because of the effect of section 4(4) of the Limited Liability Partnership Act 2000, which provides as follows:

"A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership."

The Court of Appeal had no doubt that the Claimant was a partner. However, what was the effect of section 4(4) of the LLP Act 2000? This turned on the construction of the words "employed by the limited liability partnership". The question was whether this meant “employed” in a widely defined sense i.e covering both limbs of section 230(3) of the ERA1996 (employees and workers), or did the words simply mean employed as an employee?

Elias LJ was of the view that the intention behind section 4(4) seemed to be that rights should neither be gained nor lost when partners under the 1890 Act are transformed into members of the LLP under the 2000 Act. Elias LJ could see no logical reason why Parliament would have adopted a different position with respect to employees and workers. So, if no change of status were to result from incorporation, the central question remained whether partners of partnerships formed under the 1890 Act could be limb (b) workers. The Court of Appeal thought they could not. The cases of Ellis v Joseph Ellis & Co [1905] 1 KB 324 and Cowell v Quilter Goodison Co Ltd [1989] IRLR 392 were clear authority for the proposition that a partner in an 1890 Act partnership cannot be a worker. The reasoning in these cases provided no rational basis for distinguishing between employees and limb (b) workers.
Elias LJ thought that there were two inter-related reasons why partners could not be workers. The first was legal: since a partnership is not a separate legal entity, the parties are in a relationship with each other and accordingly each partner would have to be employed, by himself or herself. The partner would be both workman and employer which is a legal impossibility.

The second reason was sociological. The very concept of employment pre-supposes a hierarchical relationship whereby the worker is to some extent at least subordinate to the employer. Where the relationship is one of partners in a joint venture, that characteristic is absent. There is lacking the relationship of service and control which is inherent in both concepts of employee and limb (b) workers. The partnership concept is the antithesis of subordination.

Therefore, as a member of an LLP the Claimant was not a worker and could not pursue her whistleblowing claim.

The interesting question was also raised as to whether an LLP member could enter into some separate employment relationship with the partnership, rather in the manner that a company director could do, but that would be a different issue.

WHISTLEBLOWING COMPENSATION
In [Local Government Yorkshire & Humber v Shah ]()UKEAT/0587/11/ZT, the EAT considered whether an ET had correctly assessed compensation for a successful whistleblowing claim.

Future employment
The ET had made an award for future loss of earnings based on its assessment of the probability of the Claimant securing a future job, regaining a position with a Primary Care Trust or a similar post had her period of secondment not been prematurely terminated. Thus, future loss was not limited to the unexpired balance of the Claimant’s secondment.

Whilst there was an element of speculation, the ET had followed the guidance in  Software 2000 Ltd v Andrews [2007] IRLR 568 where it had been said that "a degree of uncertainty is an inevitable feature in the exercise of determining future loss".

The EAT could see no reason why the Claimant’s continuing loss should have been calculated solely by reference to the unexpired period of her fixed term secondment. The Employment Tribunal was entitled to conclude on the evidence that the loss would have extended beyond this.

Injury to feelings
An award was made of £25,000 for injury to feelings where there were on-going symptoms of mental distress (but not post traumatic stress disorder). The EAT was satisfied that the decision of the ET was far from perverse and the ET was entitled to find that it was within the upper bracket of Vento v Chief Constable of West Yorkshire Police [2002] EWCA Civ 1871 (as subsequently increased by Da'Bell v NSPCC UKEAT/0227/09 to an upper bracket of £18,000 - £30,000).  The ET had explained in its remedy Judgment that the Claimant had been so affected that she was unable to contemplate applying for another role with another employer.

25% uplift
The ET uplifted the Claimant’s award by 25% by reason of non-compliance with the ACAS Code of Practice. Section 207A(1) and (2) of TULR(C)A  “applies to proceedings before an employment tribunal relating to a claim by an employee” (emphasis added).  Therefore the appeal was allowed in relation to the question of the 25 per cent uplift because the Claimant was not an employee, but a worker and so no uplift was permissible.

WASTED COSTS - ASSESSMENT
Rule 48 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004  provides:

"(1) A tribunal or Employment Judge may make a wasted-costs order against a party's representative. […].

(7) When a tribunal or Employment Judge makes a wasted-costs order it must specify in the order the amount to be disallowed or paid."

In [Casqueiro (In a matter of wasted costs) v Barclays Bank PLC ]()UKEAT/0085/12/MAA,  the Claimant lost her various claims at the ET and the employer applied for a wasted costs order which was granted in relation to the Claimant's representative.

Assessment of amount of wasted costs
On appeal, the EAT agreed that unlike the “ordinary” costs provisions in Rule 41(1)(c) (where there is power to make a reference to the County Court), no such power exists for assessment of wasted costs. This may have been an oversight in the drafting of these Rules. Therefore the Employment Tribunal or Employment Judge themselves must make that assessment and make an order in a specified amount.

Determining what costs were wasted
Ridehalgh v Horsefield [1994] Ch 205 established that a court, (or  Tribunal), in considering the making of a wasted costs order must ask themselves three questions:

"(1) Has the legal representative of whom complaint is made acted improperly, unreasonably or negligently?

(2) If so, did such conduct cause the applicant to incur unnecessary costs?

(3) If so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs?"

However, the Employment Judge had failed properly to consider which costs or which part of the costs had been caused by the unreasonable conduct in respect of which the wasted costs order was made.

The order in relation to wasted costs was therefore set aside.

Correct approach
The Employment Judge would have to consider:

* the amount of the wasted costs order to be made. The Employment Judge would need to consider which costs were wasted by the unreasonable conduct. Such conduct and such wasted costs should both be identified by the Employment Judge; and the third test in Ridehalgh* (i.e. whether in all the circumstances it would be just to order payment of the whole or any part of the relevant costs). If so, the Employment Judge would have to determine a specific amount to be paid.

The EAT did not hear argument on whether the provision for taking into account the paying party's ability to pay is restricted to an “ordinary” costs order (in Rule 41) or whether that principle applies equally to a wasted costs order (under Rule 48). However, the parties were given liberty to raise any arguments on that point at the remitted hearing.

**COSTS - BIAS
What happens where an ET gives the impression of having already made up its mind in relation to costs issues? The point arose in [Oni v NHS Leicester City ]()**UKEAT/0144/12/LA.

The Claimant lost her claims of constructive unfair dismissal, direct race discrimination and victimisation and was ordered to pay the entire costs of the proceedings (which had lasted 13 days) because not only was the bringing of the claims unreasonable, but the manner in which they were conducted was also unreasonable. The Claimant made an application that the ET recuse itself because the Employment Judge had been sympathetic to the employer throughout the proceedings and, but for his encouragement, the employer might not have applied for costs. The ET refused the application.

The Claimant succeeded in her appeal to the EAT. The EAT approached the allegation of bias by reference to the Court of Appeal’s decision in In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 , as approved by the House of Lords in Porter v Magill [2002] 2 AC 357.The test requires the Court or Tribunal to first ascertain all the circumstances and then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the Tribunal was biased.

Recusal
The EAT considered that it is in the interests of justice that the ET which dealt with the liability hearing should also deal with the question of costs and the mere fact that an ET had expressed itself in terms adverse to the Claimant in its liability judgment, is not a ground for recusal.

However, the ET should not express itself in a way which tended to demonstrate that it had already made up its mind on issues which would only fall for decision if an application for costs were to be made. It seemed to the EAT inescapable under the heading "Conduct of the proceedings" the Tribunal’s Decision in Oni did express itself in a way that would be taken by the informed and fair-minded observer as principally directed to the possibility of an order for costs. That was because the wording in the Decision:

* plainly called to mind threshold tests for the grant of an order for costs; and * expressed concluded views on the application of those tests.

In the EAT’s view, the informed and fair minded observer would conclude that there was a real possibility that the ET had pre-judged the question of costs. The lesson was that “a Tribunal should not however reach or express concluded views which really anticipate arguments on the question of costs which have not yet been put before it.”

Means to pay - Directions
The ET's finding that the Claimant had means to pay an order for costs (anticipated to be very substantial in amount) could not stand in the absence of proper consideration of her means
The EAT suggested that Tribunals may consider the use of directions in respect of applications for costs orders. Litigants in person, even if they appreciated that the ET may take their means into account, may not know what to do in order to prepare for that issue. They may think it will be sufficient to make a submission on the question to the Tribunal. However, ETs are likely to require more.

The EAT thought that a possible solution to this problem (at least where the ET is giving directions in advance relating to a costs hearing), is to require that a party who wishes their means to be taken into account should complete County Court form EX 140 - a questionnaire with a statement of means. A copy can be downloaded the MOJ website here.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator.