In late May 2014, the Supreme Court delivered a ruling that should be a welcome development for those seeking the expansion of employment status and to those who have protection for whistleblowers close to their hearts. And yet, it can be argued (and will be, in what follows) that the ruling sheds light on a troubling discrepancy between the approach that courts take in cases involving white collar workers, and those involving blue collar workers.
First, the facts: the case involved a qualified solicitor, Krista Bates van Winkelhof [‘the appellant’], an equity partner in a law firm, Clyde & Co LLP [‘the LLP’]. In November 2010 the appellant became aware that the managing partner in a Tanzanian law firm which was involved in a joint venture with the LLP, was paying bribes to secure work and the outcome of cases. She reported these facts to the money laundering officers of the LLP. In response, she was suspended, was subject to allegations of misconduct and, in January 2011, ultimately dismissed. The appellant claimed protection under the whistleblowing provisions of the Employment Rights Act 1996. The central issue, however, is that such protection is awarded only to a ‘worker’ within the meaning of section 230(3) of the Act. This section is composed of two ‘limbs’. The first, limb (a), covers an individual who works ‘under the contract of employment’, and is thus ‘an employee’. It was not suggested that the appellant was an employee. The question was whether the appellant falls under limb (b), which covers an individual who works under
“any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.”
The employment tribunals and courts delivered a see-saw of decisions.
The rulings: In the first instance, the Employment Tribunal found that the appellant was not a worker, as she worked “in business in her own right receiving a share of the profits in relation to the work carried out”. The Employment Appeal Tribunal allowed her appeal, focusing on the fact that the appellant could not offer her services to anyone else, that she was in a subordinate position, and the LLP was not her client. The Court of Appeal reversed again. While Elias LJ acknowledged that that “there is a powerful case for saying that, focusing solely on the language of section 230, the terms of the statutory definition of worker were satisfied in this case” and that that the LLP “could in no sensible way be said to be either the client or a customer of the claimant” (thus accepting the analysis of the Employment Appeal Tribunal), he found that the appellant could not be viewed as a ‘worker’, because an LLP could not be described as an employer of its members. Or, from the reverse perspective, Elias LJ states that “underlying the statutory definition of ‘worker’ is the notion that one party has to be in a subordinate relationship to the other”. In addition, the CA found that section 230(3) was impliedly modified by section 4(4) of the Limited Liability Partnerships Act 2000. This provides:
“A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership.”
So now the question became whether the restriction embedded in section 4(4) covers both limb (a) and limb (b) of section 230(3) of the ERA. If so, as the LLP argued, a partner cannot be an employee nor a worker. If a more restrictive interpretation is accepted, then section 4(4) will apply only to employees, but not to workers. The CA favoured the wider interpretation, thus concluding that those who would enjoy worker protection under the tests developed for section 230(3), would be denied such status as a result of section 4(4).
The Supreme Court disagreed.
It is important for the argument that follows to make note of Lady Hale’s statement, opening the substantive discussion. Taking a birds-eye view of the proceedings, she states (para 16):
The immediately striking thing about this case is how much hard work has to be done in order to find that a member of an LLP is not a worker within the meaning of section 230(3)(b) of the 1996 Act. It is common ground that the appellant worked “under a contract personally to perform any work or services”. It is now common ground that she provided those services “for” the LLP. It is also now common ground that the LLP was not her “client or customer”. The Court of Appeal … accepted that there was a “powerful case” that the definition was satisfied. How then can it be said that she was not a “worker” for this purpose?
Lady Hale states, first, that the ‘natural and ordinary meaning’ of ‘employed by’ is employed by a contract of service, and thus should not apply to a wider range of contracts. Second, the law now recognised a range of employment status, from ‘employee’ through ‘worker’ and on to self-employed individuals who provide services as part of a service to others, but are still protected under health and safety laws or the Equality Act 2010, for example. Therefore, if Parliament would have wished to include workers in the meaning of section 4(4), it could have done so explicitly. Thirdly, the Limited Liability Partnership is a new corporate structure, the parameters of which are yet to be determined. It is not obviously clear whether partners in such a structure may be workers (in the wider sense) of the partnership. If Parliament wished to limit the possibility, again, it could have done so.
Lady Hale also rejected the Court of Appeal’s observation that subordination is a necessary ingredient in the employment relationship. Subordination would be observable for those employed under a contract of employment. However, for workers and those under a contract “personally to do work” (Equality Act 2010, s 83(2)), subordination is ‘not a freestanding and universal characteristic’ (para 39).
Discussion: over the past decade, Professor Mark Freedland has advanced (more recently, with Nicola Kountouris) a ‘radical approach’ to expand statutory protection by detaching employment rights from the traditional dichotomy of employee/self-employed, and provided a new organising idea of personal work relationship to replace the old categories. This
flexible, purposive approach would take into account dignity, fairness, personal development and economic performance in the regulation of the personal work relationship.
It may be that if this approach suffered a setback in the 2011 case of Jivraj v Hashwani (at least according to Chris McCrudden, but see the reply by Freedland and Kountouris), it has regained force in the current case. While still operating within the parameters of the traditional categories, the Supreme Court’s common sense approach, on clear display in section 16 of its judgment (quoted above), suggests that such categories may be transformed from strict boundaries to signposts, en route to decisions that take into account the employment context, power relations, distributional and efficiency considerations. Expanding worker status in this case, it should be made clear, has implications not only for whistleblowing protection, but also for the application of the National Minimum Wage Act (probably only of theoretical relevance in this case), Working Time Regulations 1998 and Part-time Workers (Prevention of Less Favourable Treatment) Regulations2000, to give but a few examples. It may also pave the way for the expansion of employment status in other cases.
And yet, the juxtaposition of this case against a series of cases where worker status was routinely denied to agency workers employed as cleaners, social service workers, prison maintenance workers, for example, raises the concern that courts are more willing to expand protection to ‘white collar’ workers, all the while being far more judicious and legalistic where ‘blue collar’ workers are concerned. This critique is made less casuistic, and more structural, when analysing the Court’s comments concerning the (ir)relevance of subordination as an essential element in the analysis of worker status. In fact, one may say that if subordination
(whether administrative or economic – see here and here) was viewed as a necessary and sufficient ingredient for the assertion of worker status, the Court’s reasoning seems to reject not only the former, but also the latter. The implications are significant: minimising the importance of subordination as a necessary element would, as it did in the present case, allow employment protection to expand to independent, professional and expert individuals employed under a wide range of contracts. However, dismissing the relevance of subordination as a sufficient element would narrow (or, at least, bar the effort to further expand) protection currently denied to agency workers, regular casuals, zero-hour workers and others. This would be regrettable, for it is those workers whose subordination is most apparent, and who are most in need of protection.