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Peter Jones of The HR Dept

Do LLPs still offer Limited Liability?

The status of the limited liability partnership (LLP) was called into question recently after a high profile whistle blowing case at the Supreme Court.

The Court ruled that whilst an LLP partner cannot be defined as an employee they are in fact ‘workers’, which affords them certain protection with regards to employment rights.

This ruling both paves the way for partner-level whistle-blowing claims to be levelled at firms for the first time and poses further questions on the employment status of partners.

This is a highly significant decision. By defining partners as ‘workers’ it means that LLP members will be entitled to various statutory protections that they have not enjoyed before.

This leaves a big question mark over the circumstances in which an LLP member can be an employee and whether a partner in an ordinary partnership can be a worker or an employee of it.

The LLP structure has been particularly popular in finance, accounting and legal services. The Supreme Court’s decision that LLP members can be workers may have repercussions about how these businesses wish to structure and manage their memberships.

To avoid getting caught out, LLPs should move quickly to mitigate risks thrown up by this decision by getting expert HR advice to:

  • Ensure that they introduce a solid whistle blowing policy and process
  • Create a culture where whistleblowers can speak up without fear of reprisal
  • Review the rights that LLP members may be entitled to receive and which acts will now cover LLP members– including paid annual leave or to be auto-enrolled in a pension scheme, minimum wage etc.
  • Urgently review LLP agreements and other key documents
  • Introduce proper processes and policies which will evidence genuine business reasons (unrelated to any whistle blowing) when an LLP member is exited, demoted or subject to profit share reduction.

Firms who may be affected by this landmark case should act now and seek professional advice to ensure their liability is limited.