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Chambers & Partners
27/09/2011

Williamson & Soden Solicitors v. JJR Briars

Uncategorized

Employment Appeal Tribunal

In determining the employment status of a solicitor who, after working for his firm as an employee, had switched to remuneration on a profit-share basis, the tribunal had been entitled to analyse its findings of fact by reference to the question of whether the new arrangements had changed his employment status. There was no rule of law requiring it first to address the issues by reference to the Partnership Act 1890.
 
The appellant firm of solicitors (W) appealed against a tribunal's decision that the respondent (B) was an employee rather than a partner. It was common ground that B had initially joined W as an employee and had remained an employee after being promoted to the status of "salaried partner". The dispute centred on B's status after he entered into a new arrangement with W in 2004. Under that arrangement, instead of receiving a salary, B was paid what was described as a "guaranteed profit share" which equated to a sum equivalent to his previous salary, together with a percentage of the firm's profits. The tribunal found that under the agreement, the benefits of B's contract of employment persisted and nothing in the arrangements changed his status as an employee. He bore no risk of losses; had no capital stake in the firm; was required to meet performance targets; was on one occasion at risk of redundancy; and was not consulted about significant events in the life of the firm. W submitted that the tribunal had erred in failing to direct itself that, in accordance with the Partnership Act 1890 s.2(3), receipt of a share of the profits of a firm was prima facie evidence of equity partnership, and that an equity partner was not an employee.
 
HELD: The question to be determined was whether B came within the definition of an employee, and that depended on the nature of the 2004 agreement. There was no rule of law to the effect that a tribunal had first to address the question of partnership, Kovats v TFO Management LLP (2009) ICR 1140 EAT and Tiffin v Lester Aldridge LLP (2011) IRLR 105 EAT considered. Moreover, the principle that a tribunal should generally have regard to the terms of the 1890 Act, where relevant, in the resolution of a disputed question of employee status was not to be elevated into a rule of law. It was up to the tribunal to decide how best to address the questions arising in the particular circumstances of the case before it. It was essential to focus on the true nature of the relationship, which would primarily be a matter of fact, and the labels that the parties placed on that relationship were not necessarily determinative, Stekel v Ellice (1973) 1 WLR 191 Ch D followed, Cowell v Quilter Goodison Co (1989) IRLR 392 CA (Civ Div) considered. There was no clearly defined litmus test; everything depended on the circumstances. One of the principal matters to be considered was the question of the extent of any lawful authority to command. Partnership involved heavy obligations, and it might be expected that a change from the status of employee to that of partner would be clearly and cogently agreed. In the instant case the tribunal had been entitled to reach the conclusion it did. It had been entitled to make the findings of fact that it did, and it had been entitled to analyse them by reference to whether there had been a change in B's status after the 2004 agreement. B took no risk of loss; his share of the profits was merely persuasive rather than determinative evidence of status as a partner; he was subject to direction by the firm, the government of which was in the hands of the equity partners; and had W sought to change B's status, it was surprising, given the onerous responsibilities of a partner, that the paperwork did not more clearly reflect that change (see paras 25, 27, 30-33, 35, 39 of judgment).
 
Appeal dismissed
 

LTL 21/7/2011
EMPLOYEES, EMPLOYMENT STATUS, EQUITY PARTNERS, PROFIT-RELATED PAY

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