Employment status – Limited liability partnerships - Members

M Kovats v (1) TFO Management LLP (2) The Family Group of Companies: EAT (Mr Justice Birtles, T Motture, D Welch): 21 April 2009

The appellant (K) appealed against an employment tribunal’s decision that he had not been an employee of the first respondent (T), a limited liability partnership (LLP).

T’s business was to provide investment advice. K had signed a deed of accession, agreeing to be bound by T’s members’ agreement. K’s role was to act as chief investment officer. He was entitled to a fixed membership distribution of £80,000 a year. He was paid gross and was responsible for his own income tax and national insurance. Difficulties arose in relation to K’s performance and the nature of his role, and it was determined at a membership meeting that he should be required to retire.

K brought a claim for unfair dismissal, but the tribunal dismissed it on the ground that it did not have jurisdiction because K had not been an employee. In doing so, it took as its starting point section 4(4) of the Limited Liability Partnerships Act 2000. The issues for determination were (i) whether a member of an LLP under the 2000 act was capable of being an employee; (ii) if so, whether the tribunal had erred in law in finding that K was not an employee.

Held: (1) In enacting section 4(4), parliament had expressly provided that the legal test for determining whether a person was a partner or an employee of a partnership also determined whether a member of an LLP was employed by it. The partnership test applied for determining whether the person was an employee for any purpose, including for the purposes of the Employment Rights Act 1996. The test of determining employment status in an LLP was additional to the standard common law tests applicable to determine whether a person was an employee or self-employed. In the context of partnership, the tribunal had to decide whether a person fell within the category of partnership or employment. If it decided that the person was not a partner, it did not follow that the person was necessarily an employee; the usual common law tests would still need to be applied, as the person might in fact be self-employed. The tribunal had been correct to consider first whether K was a partner in the LLP. Having found that he was, it correctly considered the common law tests and decided that they would not have conferred employment status on him. The tribunal had been correct to conclude that the words ‘any purpose’ and ‘that purpose’ in section 4(4) had to be regarded as a reference to K’s role as chief investment officer, and that it had to ask itself whether, if the LLP was a normal partnership under the Partnership Act 1890, K’s role as chief investment officer would be regarded as employment.

(2) The tribunal had been entitled, on the evidence before it, to conclude that K was not an employee of T. It had applied the correct legal test and had made findings of fact which it was entitled to make.Appeal dismissed.

Oliver Hyams (instructed by Pothecary Witham Weld) for the ­appellant; Shaen Catherwood (instructed by Mishcon de Reya) for the respondent.