In the UK, whistleblowing law is based on a statute prohibiting a “worker” being dismissed or subjected to any other detriment because of having made a “protected disclosure”. Until this week, the general view was that the definition of “worker”, and therefore whistleblowing protection, did not extend to partners. There were many reasons for this view, such as the fact that discrimination legislation (which protects partners as well as other workers), is, in contrast to whistleblowing legislation, explicit as to its application to partners. However, this week, a landmark Supreme Court decision, Clyde & Co. LLP v. Van Winkelhof (overturning a decision of the Court of Appeal) held that partners were “workers” and therefore legislation protecting whistleblowers applies to partners in the same way that it applies to employees. This decision has some very significant consequences, especially in the financial and professional services industries where so many individuals are engaged as partners.
A heightened risk of litigation from partners
Most obviously, this decision means that partners have whistleblowing protection. This was not a case where a partner sought to gain employment rights by alleging she had been misclassified as a partner when in fact she was an employee. Rather, it was a clear ruling that all partners are entitled to whistleblowing protection.
Based on our experience, where an individual’s job is at risk, they frequently raise allegations of whistleblowing – even where such allegations are without merit – as a defensive and protective measure. Under UK law, the scope for an individual to exploit whistleblowing protection in this way is made easier because: the protection applies even if the underlying concern is not upheld; and the recent change to legislation which removed the requirement for a disclosure to be made in “good faith” in order for whistleblowing protection to apply. Our expectation is that we will see partners who are involved in contentious situations to start adopting this tactic.
Update policies and procedures and provide training
Although it is good practice for whistleblowing policies and procedures, including whistleblowing hotlines, to extend to partners, especially in the financial services industry, where there are regulatory requirements to have procedures in place to deal with whistleblowing, it is now more important than ever for businesses, especially those that engage partners, to ensure that they have clear and robust whistleblowing policies and procedures and that they expressly apply to partners. In addition, we would strongly recommend providing training to partners to ensure compliance with these policies. In our experience, the existence of robust policies and procedures together with training makes it far easier to effectively deal with whistleblowing issues when they arise.
The overriding of express provisions on forum, arbitration and governing law
It is very common for partnership agreements to contain arbitration provisions and explicit provisions about governing law and forum. However, these will be largely irrelevant in relation to a claim for whistleblowing.
A partner’s (and any other worker’s) entitlement to whistleblowing protection is a right derived from statute. This creates a right for any worker with a sufficient connection to the UK (broadly a worker must work wholly or mainly in the UK), to have a complaint relating to whistleblowing to be determined by an Employment Tribunal (specialist UK employment courts) under UK law. This statutory right supervenes over arbitration clauses, governing law and forum provisions contained in contractual documents. This means that arbitration clauses or governing law and forum provisions cannot be relied upon to prevent a partner with sufficient connection to the UK from bringing a complaint for whistleblowing under UK law before an Employment Tribunal.
Summary – further erosion of the distinction between partners and employees
This decision is a further example of the erosion of the distinction between partners and employees. It follows recent changes to the interpretation of tax and social security legislation which means many individuals previously classified as partners must now be treated as employees from a tax and social security perspective. In practical terms, this erosion demonstrates the increasing need for businesses to treat partners and employees in the same way, especially from a regulatory and compliance perspective.