Tiffin v Lester Aldridge LLP UKEAT/0255/10/DM
Appeal by the claimant against a ruling that he was not an employee, but a partner, of the respondent and thus could not bring claims before the Employment Tribunal. Appeal dismissed.
The claimant became a salaried partner in a partnership, which then became a Limited Liability Partnership, the respondent in this case. The claimant then became a Fixed Share Partner in the LLP. The claimant claimed that, as a Fixed Share Partner of the respondent as opposed to an Equity Share Partner, he was an employee within the meaning of section 230(1) of the Employment Rights Act 1996, and thus entitled to bring claims against the respondent. The Employment Tribunal found that he was a fixed share/equity partner and non-employee of the respondent for several reasons including the fact that the claimant was a cheque signatory, he had contributed capital to the respondent, he was entitled to vote at members meetings and he had a share of the profits.
Amongst the claimant’s grounds of appeal was the contention that the ET had erred in finding that the claimant was a partner because he was not involved in management, he received too small a share of the profits and undue weight was given to the labels of the different types of partners without looking at the substance of their relationship with the respondent. The EAT considered the case of M Young Legal Associates v Zahid  1 WLR 2562 and concluded from that that there was no minimum threshold that has to be reached in relation to rights to profits or involvement in management before he can be regarded as a partner. They also ruled that the ET decision fell way short of being perverse and that the ET, when looking at the definition of Fixed Share Partner, had considered all the relevant factors before reaching its decision. Appeal dismissed.
Appeal No. UKEAT/0255/10/DM
EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
At the Tribunal
On 29 October 2010
Judgment handed down on 16 November 2010
THE HONOURABLE MR JUSTICE SILBER
MR D BLEIMAN
MR S YEBOAH
MR M TIFFIN (APPELLANT)
LESTER ALDRIDGE LLP (RESPONDENT)
Transcript of Proceedings
For the Appellant MS CLAIRE DARWIN
Bar Pro Bono Unit For the Respondent MR MARK WHITCOMBE
Messrs Lester Aldridge LLP
CONTRACT OF EMPLOYMENT – Whether established
The Claimant, who is a solicitor, became a salaried partner in a partnership, which became a Limited Liability Partnership, which was the Respondent. The Claimant became a Fixed Share Partner. He received a salary and a designated but a small share of the profits. He was also liable to contribute a small proportion of the capital of the Respondent. The Claimant had very limited rights to be involved in the management of the Respondent.
The Employment Tribunal held that he was a "partner" within the meaning of section 1(1) of Partnership Act 1890 and not an "employee" within the meaning of section 230(1) of Employment Rights Act 1996.
The Claimant appealed
Held by the Employment Appeal Tribunal dismissing the appeal that:
- For the Claimant to be a "partner", a relationship has to exist between himself and other persons by which they "carry on the business [of the respondent] in common with a view of profit" (section 1(1) of Partnership Act 1890). In that case, the Claimant could not be an "employee" if he was a "partner";
- There is no minimum threshold that has to be reached in relation to a person's rights to (a) profits or (b) involvement in management before he can be regarded as a partner (M. Young Legal Associates v Zahid;
- The Employment Tribunal was entitled to reach its decision and it falls a long way short of being perverse as the Claimant had failed to show any overwhelming case that the Employment Tribunal made a decision which no reasonable Tribunal could have reached (dicta of Mummery LJ in Crofton v Yeboah; and that;
- The Employment Tribunal was not entitled to attach definitive or crucial importance to the description of the Claimant as a Fixed Share Partner and it did not do so (Steckel v Ellice  1WLR 191, 199 considered).
- Mr Martin Tiffin ("the Claimant") appeals against a decision of the Southampton Employment Tribunal sent to the parties on 18 December 2009 holding that the Claimant had been a partner of Lester Aldridge LLP ("the Respondent") within section 1(1) of the Partnership Act 1890 ("the 1890 Act") and was therefore not an "employee" within the meaning of section 230(1) of the Employment Rights Act 1996 ("the 1996 Act"). The Claimant had contended that he was an "employee", which would have entitled him to pursue claims.
- The Employment Tribunal heard other claims of the Claimant for unlawful deduction of wages and holiday pay but they were based on the undisputed contention that the Claimant was a "worker" within the meaning of section 230(3) of the 1996 Act and/or regulation 2(1) of the Working Time Regulations 1998. This finding is not the subject of an appeal.
II The Findings of the Employment Tribunal
- The Employment Tribunal found that:-
(a) The Respondent is the successor Limited Liability Partnership ("LLP") to the Lester Aldridge Partnership ("the Partnership") which was converted to an LLP on 1 May 2007. The Claimant commenced employment with the Respondent on 9 August 2001 as an Associate in the Partnership's property development team based at its Bournemouth office. On 1 October 2005, he was promoted to be a salaried partner which was a temporary measure before the Claimant was admitted as a fixed share partner ("FSP") on 1 May 2006 at which time the partnership was governed by a Partnership Agreement dated 1 November 2004. The Claimant told the Employment Tribunal that he signed the Partnership Agreement as a stepping stone to becoming a fixed equity partner in the partnership;
(b) From 1 May 2006 when the Claimant was admitted as a FSP he was paid monthly drawings (not salary) calculated on the basis of an annual fixed share of profits of £62,500 together with the benefit of 5 profit share points in the partnership, the value of which was dependent on the actual profits achieved by the Partnership in the financial year. The Claimant also became an authorised signatory on the Partnership's client and office bank account and he was required to make a contribution of £5000 to the Partnership;
(c) There were other differences from the Claimant's Associate status because first his National Insurance contribution class changed to classes 2 and 4 and second the partnership paid for additional benefits of permanent health insurance and life insurance for him and these were different to the benefits he had received as an employee. In addition, he was also required to make his own pension arrangements and he could claim motor/travel and telephone expenses for personal use as well as being responsible for dealing with his own tax and other separate arrangements made with the Respondent, who no longer considered him as an employee. Indeed, the Respondent issued a P45 to him to confirm that his last day of employment with the Partnership was on 30 April 2006;
(d) In April 2007 Mrs Cowen, a partner in the Respondent partnership. sent to all partners including the Claimant a copy of the Member's Agreement, which had been prepared in readiness for the conversion of the partnership to LLP status she drew the attention of all partners to the differences between the draft Member's agreement and the agreed form of the updated Partnership Agreement which had been prepared in readiness for this conversion. She specifically referred to the introduction of the status of "salaried partner" as the Partnership anticipated that salaried partners would be admitted to the LLP while the Partnership Agreement did not recognise the status of salaried partners;
(e) The Claimant signed the Member's agreement dated 30 April 2007 as a FSP. The Employment Tribunal rejected a claim by the Claimant that he had been coerced as they held that the Claimant was a willing participant in the conversion of the partnership to LLP status;
(f) In addition to the Member's agreement there was also an agreement for the transfer of the Partnership's business assets and liabilities to the Respondent. The agreement also referred to the Partnership's employees and it confirmed that the Respondent would write to each of the employees on the transfer date to inform them their employment would continue with the Respondent with their continuity of their employment being preserved. The Claimant signed that agreement and he was listed in a schedule to the agreement as a FSP. Thus did not receive from the Respondent a letter sent to its employees relating to the transfer of assets and liabilities which were the subject of the agreement;
(g) Eight of the Respondent's employees were admitted to be salaried partners on 1 November 2007 and in accordance with the member's agreements, they continued to have the status of employees which was specifically confirmed in the employment contracts issued to them. The Claimant also made an increased capital contribution to the Respondent in October 2007 as did all the full equity partners and the other FSPs in their appropriate proportions. The Claimant's share was the additional sum of £1,250 which he paid;
(h) Under the Member's Agreement, the claimant as a fixed share partner was entitled to vote at members meetings. On a show of hands, all equity partners had one vote while on a poll, all equity partners had one vote per point. Each full equity partner has 100 points and all but two fixed share partners (which included the Claimant) had five points each. Two fixed share partners had ten points each. Some decisions were subject to a special poll vote where each full equity member had five votes, FSPs with less than five points had two votes and a FSP with more than five points had three votes. Salaried partners had no voting rights and could only attend partners' meetings by invitation;
(i) A FSP was defined in the Member's agreement as a member of the Respondent and the Claimant's membership of the Respondent was terminated in accordance with the terms of the Member's Agreement which involved serving a Provisional Dismissal Notice on the Claimant and convening a meeting at which the Claimant was entitled to address those present and indeed he duly did so;
(j) Although the Claimant was instructed not to attend the Respondent's office from 14 August 2008 which was the date of the Provisional Dismissal Notice served on him, Mrs Cowen of the Respondent confirmed that the Claimant remained a partner and member of the Respondent until 14 February 2009;
(k) The Claimant confirmed that he had not made any representations to the Respondent that he was an employee until he issued the present proceedings;
(l) The Claimant accepted that (i) he had been a FSP in the Respondent until his removal from the Respondent; (ii) he had some discretion as to at which office he worked; (iii) he also had some discretion when he attended work although he recognised the need to be available during core hours; and (iv) the financial arrangements had been advantageous to him;
(m) The Claimant had to work to deadlines imposed on him either by his clients or by other partners who provided work to him and that he had not established a client base to provide work to him and to his colleagues; and
(n) The evidence of the Claimant could be summarised as being first that he had entered into a FSP with others in the partnership; second that he had continued with that status in the Respondent; third he had taken such advantages as this gave to him; but fourth, he did not consider this placed him in a better position than an employee.
- The Employment Tribunal then concluded by stating that:-
"28. The Employment Tribunal's findings of fact, the majority of which are not disputed, and which are conveniently recited in Mr Whitcombe's Skeleton Argument, confirm that the claimant was an Equity Partner in the Respondent and was previously a Fixed Share Partner in the Partnership. He viewed entering the partnership as a stepping stone to advance his career. He intended to become a partner and accepted the changed status, new obligations and responsibilities this involved. The two agreements the employment Tribunal has examined in detail are not shams. It has not been suggested that they do not reflect the intentions of the parties or that they were not intended to govern the relationship between the parties to the Partnership and then the Members of the Respondent.
29. The definitions in these agreements are substantially the same as are the continuing obligations and arrangements that govern the relationships between the Partners in the Partnership and the Members in the Respondent. The claimant contributed capital and shared profits with his fellow partners, and the success of the business depended upon meeting client demands and accepting a particular structure of management for partners and then for members. There has never been any ambiguity as to the claimant's positions in either the Partnership or the Respondent.
30. The Employment Tribunal's findings of fact also lead to the inevitable conclusion that taking into account the relevant common law tests Kovats refers to the claimant would not have been an employee in a partnership under the Partnership Act.
31. The claimant was a Fixed Share/Equity Partner and non-employee in the Respondent. He did not work under a contract of service for the Respondent, rather he worked pursuant to the Respondent's Membership Agreement. Therefore he was not employed by the Respondent under the terms of section 230(1) of the Employment Rights Act 1996 and all his claims that rely on that status – unfair dismissal, breach of contract and statutory redundancy payment must fail and be dismissed for that reason."
III The Issues
- It is common ground between the parties that the issue for the Employment Tribunal was whether the Claimant was a "partner" as defined in the 1890 Act or whether he was an "employee" within the provisions of the 1996 Act. Miss Claire Darwin counsel for the Claimant contends that the Employment Tribunal erred as they should have found that the Claimant was not a partner but that he was an employee within section 230(1). Mr Mark Whitcombe counsel for the Respondent disagrees and says that the Employment Tribunal was correct to find that the Claimant was a partner and not an employee. It is common ground that the Claimant was either a "partner" or an "employee" and that he could not have been an independent contractor.
- The classic definition of a partnership is set out in section 1(1) of the 1890 Act, which is that it is "the relation which subsists between persons carrying on business in common with a view of profit". Lindley & Banks on Partnership states that "before a partnership can be said to exist, three conditions must be satisfied, i.e. there must be (1) a business (2) which is carried on by two or more persons in common (3) with a view of profit" (18th Edition Paragraph 2.01).
- It might be appropriate to explain now some of the different types of partners that can exist. Apart from equity partners, there is the status of being a "salaried partner" and such a person is in reality an employee of the firm and is remunerated by a fixed or variable salary but nevertheless is held out to clients and the world as a partner even though he or she does not enjoy all the rights normally associated with that position (see Lindley & Banks- Paragraph 5.69). A salaried partner can be a true partner, (see Steckel v Ellice  1 WLR 191,199) but there are cases in which salaried partners have been held to be employees (see Briggs v Oates  ICR 473).
- The next status is that of a FSP, which appears to be a relatively new phenomenon and it denotes a partner who is principally remunerated by a fixed share of the profits. Lindley & Banks state that:-
"It should be noted that, in an attempt to distance themselves from the overtones of employment which are so often associated with salaried partnership, many firms now resort to the alternative status of "fixed share partner", denoting a partner who is principally remunerated by a fixed share of the profits. Intrinsically, this is no different from the more traditional salaried partnership, but as a result of the de facto requirements which HM Revenue & Customs expect to be satisfied before partner status is accepted, the following attributes are now shared by most fixed share partners
(a) entitlement to a small share of residual profits and losses (over and above their fixed profit shares);
(b) an obligation to contribute a small sum of capital; and
(c) a right to participate, to a greater or lesser extent, in the decision-making process of the firm.
In the current editor's view, none of these attributes are truly determinative of partnership status, as was made clear in M. Young Legal Associates v Zahid, ( 1 WLR 2562)…"
- The case of Zahid shows that a person can be a partner even in cases where as Wilson LJ giving the only reasoned judgment stated at page 2574 that there is:-
"the absence of a direct link between the level of payment and the profits of the firm is in most cases a strongly negative pointer towards the critical conclusion as to whether the recipient is among those who are carrying on its business. But the conclusion must be informed by reference to all the features of the agreement"
- In that case, the person concerned was held to be a partner even though he was not required to contribute capital and the amount of his pay took no account of the firm's profits but the reason why he was held to be a partner was that the firm could only lawfully practice if the individual concerned was a partner. This decision shows that to be a partner, a person need not necessarily receive any part of the profits or to have contributed to the capital as the absence of these features will in exceptional cases not necessarily preclude a finding that a person is a partner. It also shows that there is no minimum share of profit that a person has to receive in order to be a partner.
- Section 4(4) of the Limited Liability Partnerships Act 2000 states that:-
"(4) 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".
- It is common ground between the parties that in order to ascertain if a person is a partner in a Limited Liability Partnership (such as the Respondent), the Employment Tribunal was first required to consider whether the person concerned would be a partner in the partnership and if the answer was in the negative it then had to consider whether the common law tests would have conferred employment status on him (Kovats v TFO Management LLP .
- Miss Darwin contends that the Employment Tribunal was in error because:-
(a) Insofar as it did consider whether the Claimant would have met the definition of partner in section 1(1) of the 1890 Act, it reached a perverse finding or made an error of law because the Claimant was not involved in management;
(b) Insofar as it did consider whether the Claimant would have met the definition of partner in section 1(1) of the 1890 Act, it reached a perverse finding or made an error of law because he received too small a share of profits;
(c) It gave undue weight to the labels given by the parties as to their relationship without looking at the substance of their relationship which is what the Employment Tribunal was obliged to do;
(d) It considered whether the Claimant would have been an "employee" in a partnership under the 1890 Act whereas in accordance with section 4(4) of the Limited Liability Partnerships Act 2000, it was required to consider whether the Claimant would have been a "partner" under the 1890 Act and secondly, applying the common law test whether the Claimant was an employee as specified in Kovats (supra); and
(e) It ought to have found that the Claimant was an employee because a number of factors were consistent with that conclusion.
- The case for the Respondent is that the Employment Tribunal reached the right decision and that it discloses no error of law.
IV Was the Decision of the Employment Tribunal perverse or an error of law in relation to the ability of the Claimant to be involved in the carrying on of the Respondent's business?
- Miss Darwin said that a correct analysis of the true position showed that the Claimant was not a partner but that he was an employee. She points out that the requirement of "carrying on in common of business" presupposes that the partners who are carrying it on are doing it for their common benefit and that they have expressly or impliedly accepted some level of mutual rights and obligations between themselves.
- She points out that although the Claimant as a FSP was entitled to attend and vote at certain members' meetings and their votes were limited. There were six main elements of the management structure but the FSPs were only involved in one element of the management structure. The FSP could attend meetings of all partners in order to agree major strategic issues but other ownership responsibilities were carried out only by the Full Equity Partners although some were delegated to small groups the members of which were nominated by the managing partner and which were then approved by a majority of Full Equity Partners.
- The Full Equity Partners were solely responsible for many important matters including the formulation of the Respondent's business strategy, approving the Respondent's annual business plan, approving the budget for the next year and outline projections for the next two years, agreeing targets and key performance indicators and monitoring the performance of the Respondent and the Management group against those targets as well as approving any major change in the policies of the Respondent. So far as the resolutions which could be dealt with at a meeting at which FSPs were entitled to attend, there are 52 different types of resolutions listed in the Respondent's Resolution Table and of those FSPs were only entitled to attend meetings in respect of ten of these types of resolutions. In respect of the meetings at which FSPs were entitled to attend, then in respect of two of them, it was necessary to have an Ordinary Poll Vote in which all the FSPs between them held 3.3% of the vote.
- On voting Miss Darwin points out that the Claimant as a FSP had very limited rights as he together with another FSP each had five votes, while the other two FSPs had ten votes and the full equity partners had one hundred votes. Where decisions were subject to a Special Poll Vote, each full equity partner had five votes, FSP with fewer than six points (such as the Claimant) had two votes while FSP with more than five points had three votes. On simple votes, both FSPs and Full Equity Partners had one vote each whether on a show of hands or by a secret ballot. Thus it is said by Miss Darwin that the Claimant did not as required by section 1(1) of the 1890 Act carry on "business in common" with the Respondent.
- There is no statutory provision or authority, which states that for a person to be a partner, he or she has to have a certain minimum number or a certain minimum types of rights to vote or to participate in management decisions. Indeed the members of this Tribunal are aware that in many large professional partnerships, all but very few of the partners have any right to participate in the overwhelming range of decisions made by the firm and yet they are clearly partners. There is evidence that the Claimant was entitled to participate in the Respondent's management as he could attend and vote at partnership and members meetings as well as being able to make representations at them. He had authority to sign cheques on behalf of the Respondent. Indeed the Employment Tribunal found that the Claimant:-
"as a fixed share partner was engaged by Mrs Cowan [who was an equity partner in the Respondent] in all matters which he raised with all the partners of the Partnership in respect of the conversion to LLP status to which the claimant was a willing participant." 
- In our view, there was quite enough material there to enable the Employment Tribunal to conclude that the Claimant carried on business in association with the Respondent.
- It must not be forgotten that the threshold for proving perversity in an appeal from the Employment Tribunal is a high one as was famously explained by Mummery LJ in Yeboah v Crofton  IRLR 634 when he said such a claim could only succeed:-
"if an overwhelming case is made out that the Employment Tribunal made a decision which no reasonable Tribunal, on a proper appreciation of the evidence and law would have reached" .
This complaint of perversity falls a long way short of establishing that and indeed did not disclose an error of law. We therefore reject this ground. For the avoidance of doubt, we should add that the Employment Tribunal reached a decision open to it on the facts set out in its Decision.
V Was the decision of the Employment Tribunal perverse or an error of law in relation to the limited financial interest of the Claimant in the business of the Respondent?
- Miss Darwin contends insofar as the Employment Tribunal considered whether the Claimant had a "view of profit" within the meaning of section 1(1) of the 1890 Act, its finding was perverse and was wrong. The Employment Tribunal found first that the Claimant was paid monthly drawings which were calculated on the basis of an annual fixed share of profits; second that he had five profit share points; third that the value of any of these points in any year was dependent on the actual profits achieved by the Respondent, and fourth that he was required to make a capital contribution of £5,000 later raised to £6250 to that partnership.
- Miss Darwin attaches importance to the fact that the Claimant earned £57,000 per annum as a salaried partner and that after he became a FSP on 1 May 2006 he was paid £55,000, plus a profit share payment based on five points. The value of the Claimant's five points was expected to be about £7,000 per annum which was approximately 11 percent of his total gross salary. It is also said that the remuneration of the FSPs was determined by Equity Partners but that it was substantially less than the share of the Full Equity Partners who each had between 100 and 200 points, with some of them being eligible for "Super Plateau" performance points of 225 or 250 points. So there was a substantial discrepancy between the earnings of the Claimant as an FSP and the earnings of the full equity partner and in particular those who were eligible for "Super Plateau" performance point's status. So it was said by Miss Darwin that the Claimant's share was minimal and he could not therefore be a "partner".
- It was also pointed out that there was a great discrepancy in the contributions made by the Claimant and the Full Equity Partners as although the Claimant had contributed £5,000 of capital, which was subsequently raised in around October 2007 to £6,250, the Full Equity Partners contributed £100,000 each and this was subsequently increased to £150,000.
- Thus it is said that the Claimant's view of profit was negligible and this pointed away from the conclusion that he was a true partner. Miss Darwin sought to obtain support from the approach of the Court of Appeal in M Young Legal Associates Ltd v Zahid  1WLR 2562, 2574 where Wilson LJ explained in a passage from which we quoted a part in paragraph 9 above that:-
"33. It is idle to deny that, indirectly, an employee has an interest in the profitability of the firm for the continuation of his job may well depend on it. Nevertheless the absence of a direct link between the level of payment and the profits of the firm is in most cases a strongly negative pointer towards the critical conclusion as to whether the recipient is among those who are carrying on its business. But the conclusion must be informed by reference to all the features of the agreement. Thus, for example, provision or otherwise for a contribution on his part to the working capital of the firm will be relevant."
- There is no statutory provision or any decided case which specifies that the share of profits of a person or his or her contribution must reach a certain level before he or she can be regarded as being a partner. Indeed Zahid's case shows that the absence of any right to share in the profits or a duty to make contributions is not decisive because as we explained in paragraph 10 above, the individual concerned in that case was held to be a partner even though he was not liable to pay capital or to share in the profits of the entity concerned. This is an answer to Miss Darwin's complaint as is the fact that in large professional partnerships it is common to find partners with shares similar to those of the Claimant. It is a question of fact and in this case, the Employment Tribunal as the industrial jury was entitled to reach the conclusion it did. Indeed the case of the Appellant falls a long way short of reaching the "overwhelming case" of perversity which is the threshold needed before a decision can be perverse as was specified by Mummery LJ in Yeboah and which we cited in paragraph 21 above. Indeed, we should add that the Employment Tribunal reached a decision open to it on the facts set out in its Decision.
- Another reason why this argument of the Claimant fails is that he was entitled to a share of the residue of the firm when it was wound up. This is important because Megarry J thought that it could be in itself a sign that the recipient was a partner when he stated in Steckel (supra) at page 200 of a salaried partner that "I do not see why he should not be a true partner, at all events if he is entitled to share in the profits on winding up". When this was raised at the hearing, we asked the parties to prepare a note on whether the Claimant was entitled to share in the profits on winding up. The Claimant produced a note explaining that for every £1000 of sums available for distribution under clause 3.11.3 of the Members Agreement, he would receive £2 while the Full Equity Partners would receive just over 5% of the £1000 which amounts to about £50 and so the Claimant would receive about twenty-five times less of the available assets on the winding up than each of the Full Equity Partners. On the assumption that this is correct, this would constitute evidence that the Claimant was a partner. I stress that Megarry J did not state that a person's share on winding up had to reach a minimum level before he could be considered to be a partner. So the Claimant's right to share in the profits in the winding up would support the conclusion that he was a partner and this would be a further reason for rejecting the Claimant's case on this point.
VI Did the Employment Tribunal commit an error of law in attaching undue weight to the description of the Claimant as a partner in his agreement with the Respondents?
- Miss Darwin submits that the Employment Tribunal gave undue weight to the labels given by the Respondent to its relationships with the Claimant by describing him as a FSP and in doing so the Employment Tribunal erred in law. She points out that a person labelled as "a salaried partner" may or may not be a true partner depending on the facts as that was explained by Megarry J in Steckel v Ellice  1WLR 191,199. By parity of reasoning, she contends correctly in our opinion that the question of whether a FSP is a true partner depends on what the true relationship is, and not on any label attached to the relationship.
- It is said by Miss Darwin that the reason why salaried partners were made into FSPs was to reduce their tax and national insurance contributions, but even if true, that does not assist in determining this appeal. Nor does the fact that the Employment Tribunal said of the membership agreement and the LLP agreements signed by the Claimant that they "are not shams". The reason for that was, as the Employment Tribunal explained at paragraph 28 of its reasons, in respect of each of these agreements, "it has not been suggested that they do not reflect the intentions of the parties or that they were not intended to govern the relationship between the parties to the Partnership and then the members of the Respondent". All that means is that the agreements reflected what the parties intended and agreed. Further, it is clear that the Employment Tribunal did not regard those labels as definitive for the reasons set out in paragraph 28 to 30 of the decision, which we have set out in paragraph 4 above. The Employment Tribunal considered all the relevant factors before reaching its decision, which was open to it on the facts.
- It is worth stressing that the Employment Tribunal found that the Claimant contributed to the capital and shared profits with his fellow partners with the success of the business depended on accepting a particular structure of management for partners and then for members with the consequence that he was a partner. These were understandable conclusions, which cannot be criticised.
- In our view, this was a proper exercise for the Employment Tribunal to carry out and the conclusion at which they arrived was one open to them on the facts. For those reasons, we must reject the Claimant's submissions.
VII Did the Employment Tribunal err when it considered whether the Claimant would have been an "employee" in a partnership under the 1890 Act whereas in accordance with section 4(4) of the Limited Liability Partnerships Act 2000, it was required to consider whether the Claimant would have been a "partner" under the 1890 Act and secondly, applying the common law test whether the Claimant was an employee as specified in Kovats?
- We have found nothing which shows that the Employment Tribunal approached the matter incorrectly as they quoted the relevant passages from Kovats and then found that the Claimant was an equity partner in the Respondent as was explained in the opening sentence in paragraph 28 of its Reasons which we have set out in paragraph 4 above.
VIII Did the Employment Tribunal Err by Failing to Take into Account a Number of Factors which were Consistent with the Conclusion that the Claimant was an Employee?
- Miss Darwin contends that there are a number of factors which are consistent with the Claimant being an employee and they included the facts that (a) the Respondent provided the Claimant with benefits including permanent health insurance, life insurance, motor-travel and telephone costs; (b) there was an obligation on the Claimant to work during core hours; (c) the Claimant's work was provided to him by others as he had not established a client base and (d) the Respondent purported to dismiss the Claimant by reason of redundancy.
- There is no particular reason why a partner cannot be under the direction of other partners as has happened in this case. It is true that some of these factors may be consistent with the Claimant being an employee but the Employment Tribunal asked itself the correct question as to whether the Claimant was a partner and not an employee. That exercise is what the Employment Tribunal carried out and it answered the question in the positive. Thus we do not accept this criticism.
- Notwithstanding the able submissions of Miss Darwin, this appeal has to be dismissed. It might be some consolation to the Claimant to know that every point that could have been put forward on his behalf has been put forward clearly and cogently by Miss Darwin but no error of law has been shown to undermine the decision of the Employment Tribunal. The stark fact is that this Employment Tribunal directed itself correctly on the law and having applied it, it then reached a decision open to it on the facts, although if the facts had been different, a different result might have been arrived at.
Published: 17/11/2010 15:03