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U.K. Supreme Court ruling contradicts McCormick

|Written By David Dias

The Supreme Court of the United Kingdom issued a ruling on the status of equity partners in law firms that flies in the face a recent ruling by the Supreme Court of Canada.

The U.K. Supreme Court said parnters in an LLP can rely on employee rights protections in some areas.

On May 22, the SCC ruled in McCormick v. Fasken Martineau DuMoulin — the case of a lawyer who fought his firm’s partnership agreement requiring him to retire at age 65. Mitch McCormick insisted it was a matter of human rights and age discrimination, but the SCC rejected that premise, ruling that the freedom he was granted as an equity partner disqualified him from the protections afforded regular employees.

But just a day prior — in a kind of parallel-dimension twist — the U.K. Supreme Court issued its own ruling that said partners in an limited liability partnership are indeed afforded employee rights, at least for the purposes of whistleblowing.

The case, Clyde & Co v. Bates van Winkelhof, pits a major London law firm against Krista Bates van Winkelhof, a former equity partner who claims she was dismissed after disclosing bribery misconduct by a managing partner at an associate firm in Tanzania.

In the U.K., as in Canada, employees who blow the whistle on corporate misconduct are protected from blowback. But the U.K. appeal court determined, because Bates van Winkelholf was a partner, she did not qualify for employee whistleblower protections.

Similar reasoning was applied in the McCormick decision in Canada, but in Bates van Winkelhof’s case, the UK Supreme Court overturned the lower court ruling.

The decision states: “As the case of the controlling shareholder in a company who is also employed as chief executive shows, one can effectively be one's own boss and still be a 'worker.’ While subordination may sometimes be an aid to distinguishing workers from other self-employed people, it is not a freestanding and universal characteristic of being a worker.”

This is a strong contradiction of the reasoning being the SCC’s ruling, which relies almost entirely on the concepts of “control” and “dependency” — both facets of subordination — in determining whether a partner can be considered an employee.

The U.K. decision, meanwhile, declares that subordination alone isn’t enough, since the CEO of a company — and subordinate to none — is still considered an employee and protected.

Employment lawyer Edward Goodwyn at Pinsent Masons LLP in London issued a statement on the firm’s Out-Law.com site saying that the decision “effectively opens the door for partners/members to certain employment-related claims that thus far were considered unlikely to be available, particularly the possibility of whistleblowing, part-time working, national minimum wage, pension auto-enrolment and working time rights claims, as well as protections against unlawful deductions from their pay.”

Gillian Hnatiw, an employment law and human rights lawyer at Lerners LLP, says the U.K. decision offers an interesting contrast with McCormick, but she doesn’t think whistlebower protection for equity partners is likely to take hold in Canada.

“There is whistleblower legislation that applies to certain classes of employees in Ontario, but I cannot think of a fact scenario wherein an equity partner would be whistleblowing on their own partners, and I don’t think there is legislation that would apply if they did.”

Nevertheless, Hnatiw says the SCC has left the door open to the idea that equity partners could be considered employees if subordination and lack of control can be demonstrated.

“McCormick is significant in its rejection of the [British Columbia Court of Appeal’s] strict reasoning that partners cannot be ‘employees’ of their own partnerships, and does open the door to at least the possibility that other classes of partners will be able to claim the protection of human rights legislation as ‘employees.’”

In other words, if there’s flexibility on who classifies as an employee, there could be flexibility elsewhere.


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