The highest court in the UK enhanced the rights of partners in limited liability partnerships (LLP), a common private fund management entity structure, to blow the whistle against their firms without fear of retribution.
The UK Supreme Court on Wednesday ruled in favor of a partner in an LLP who was fired from her job at law firm Clyde & Co after complaining that a Tanzanian law firm that had a joint venture with her employer was paying bribes to secure clients.
The court overruled employment tribunal and appellate court decisions, which both said she was not protected by the law, saying the partner in question was entitled to claim the protection of the whistleblowing provisions of a 1996 UK labor rights law.
“That conclusion is to my mind entirely consistent with the underlying policy of those provisions, which some might think is particularly applicable to businesses and professions operating within the tightly regulated fields of financial and legal services,” stated Supreme Court Judge Brenda Hale in the ruling.
Legal experts believe the ruling has the potential to be a game changer in how LLPs operate.
“Now that the Supreme Court has decided to confirm that partners have these rights, we should expect to see an increase in whistleblowing disputes arising out of limited liability partnerships, which will be exposed to a higher risk of claims from disgruntled partners,” said Darren Isaacs, partner at GQ Employment Law.
Abigail Silver, senior associate at law firm, RPC, said: “An interesting effect of this ruling is that the ‘owners’ of a business, who are often party to extremely confidential material or are subject to duties of utmost good faith towards the LLP collectively or to other LLP members, are now entitled to the same protection for speaking up on matters of alleged wrongdoing as their employees. As a result, we could see many LLPs decide to revise their partnership agreements.”
In addition to whistleblowing protection, the LLP partners will also benefit from other statutory rights and protections typically only available to employees. These rights include: entitlement to rest breaks and paid annual leave, protection from being treated less favorably on account of part-time status and, rights under the pension auto-enrolment regime.
Firms that operate as an LLP should therefore urgently review the policies and working conditions that apply to their partners to ensure compliance, said a client alert from law firm Herbert Smith Freehills.
“LLP [partners] have access to financial documentation and management information that most employees would not see, and are therefore more likely to be aware of wrongdoing than more junior members of staff,” added in an emailed statement Michelle Chance, an employment lawyer with Kingsley Napley who praised the ruling. “LLPs should encourage a culture of compliance and transparency in which [partners] are valued for doing the right thing and bringing wrongdoing to their firm’s attention, so that it can be dealt with early on and stamped out.”