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Tiffin v Lester Aldridge LLP - members and employment status

The Court of Appeal has upheld the Employment Tribunal's (ET) and Employment Appeal Tribunal's (EAT) findings, that a ‘fixed share partner’ member of an LLP was not an employee, in Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35.

Mr Tiffin, a former member of Lester Aldridge LLP, submitted to the ET that he had been an employee of the LLP and that therefore the ET had jurisdiction to entertain his claims. The LLP contended that he had not and that the ET did not have such jurisdiction. The ET considered under section 4(4) of the Limited Liability Partnerships Act 2000, whether Mr Tiffin, if he and the other members had been partners in a partnership, would be regarded for that purpose as employed by the partnership. Both the ET and the EAT found for the LLP finding that, if the LLP were a notional partnership (the test to be applied under section 4(4) Limited Liability Partnerships Act 2000), Mr Tiffin's relationship would be considered that of a partner rather than that of an employee.

The Court of Appeal, dismissing Mr Tiffin's appeal, held that (i) there was no suggestion that the membership agreement governing the LLP was a sham and therefore Mr Tiffin could not assert he was an employee on that footing; and (ii) although ‘fixed share partner’ and ‘equity partner’ members had different commercial interests in the LLP, “the character of interests in the firm of these two classes of members was nevertheless essentially the same”. In these arrangements, ‘fixed share partners’ shared in the LLP’s profits, albeit only to the extent of a small profit-related share in addition to their fixed share, and they contributed a small amount to the LLP’s capital. They also had some degree of involvement in the management of the firm, in contrast to the LLP’s ‘equity partners’, who had significant voting rights, and the ‘salaried partners’ who did not (and the salaried partners were therefore properly regarded as employees). The ET had been entitled to conclude on the facts that, “viewed through the prism of s. 4(4) of the Limited Liability Partnerships Act 2000 Mr Tiffin would have been a partner in the notional partnership”.

The decision illustrates the Courts’ robust line on distinguishing members of an LLP and partners on the one hand from employees on the other, and highlights the difficulties for LLP members when trying to assert employee status.

If you would like to discuss this decision or any of the issues arising from the Tiffin case, please contact Richard Turnor, Corinne Staves, Leon Keen or your usual MTG contact.

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