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Can Partners in Professional Partnerships claim Employment Status?

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Madeleine Thomson

For businesses operating as a partnership, promotion and ownership of the business can be controlled by means of operating different levels of partnership, for example a salaried partner, fixed term partner or equity partner.Madeleine Thomson

Whereas salaried partners are sometimes regarded as glorified employees and will normally enjoy full employment rights, “fixed share” are a different breed as normally they will only contribute a relatively small share of the capital, and as a result be excluded from much of the decision making within the business and have limited voting rights. In terms of their actual stake and control of the business, there may in fact be little to distinguish between them and their salaried partner colleagues, but it now appears, in law, that salaried partners are much better protected when the business decides to end the partner’s tenure.

The Court of Appeal case of Tiffin v Lester Aldridge LLP, reported this month, has provided clarification that a fixed share partner, even one with very limited capital contribution and voting rights, does not have employee status and therefore is not entitled to seek unfair dismissal compensation if they are levered out of the business against their will.

Mr Tiffin started with Lester Aldridge, a firm of solicitors, as an employee in 2001.  In 2005 he was promoted to “salaried partner” and retained the status of employee. He was promoted again in 2006 to a “fixed share partner” and instead of salary, received monthly drawings based on a fixed share of the profits.  He was obliged to make a £5,000 capital contribution to the partnership. He received five profit share points, the value to be assessed once the profits were known for the financial year.  He became responsible for dealing with his own income tax and his national insurance contribution class changed to 2 and 4. In 2007, the firm converted to an LLP and Mr Tiffin entered into a members’ agreement where, as a fixed share partner, he was described as a “member”, whereas salaried partners were referred to, in the members’ agreement, as “employees”. His voting rights were limited and the agreement provided that if the firm was wound up, he would receive less than 25 times the value than a full equity partner.  His capital contribution increased by £1,250.

The partnership decided to terminate his membership of the LLP with effect from February 2009.  Mr Tiffin issued an unfair dismissal claim and other related claims in the employment tribunal. His employment status was disputed and he failed to persuade the employment tribunal he was an employee, in order to pursue his employment claims.

Because the partnership was an LLP Section 4(4) of the Limited Liability Partnerships Act 2000 also applied, which states that LLP members can enjoy employment status in certain circumstances but a member shall not be deemed as employed “unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership”.  This means that the same principles apply to determine whether a member of an LLP is an employee as apply to establish whether a partner in a partnership is an employee.

Though salaried partners in the Lester Aldridge business made no capital contribution, enjoyed no share of the profits or share in surplus assets in a winding up and no say in the management of the firm, the fixed share partners enjoyed all of these things, though to a far lesser degree than the full equity partners. Therefore the features of the fixed share partners bore a much closer resemblance to the equity partners than their salaried partner colleagues.  The Court of Appeal considered that the intention of the parties in signing up to the members’ agreement was to establish a relationship of partnership and not employment.

Mr Tiffin argued that he had no real say in the management of the firm.  However, the court reviewed the fact that he had been entitled to speak at partners’ meetings and he had voted on 22 of 52 proposed resolutions.  He had a vote when it came to opening or closing an office, merging or acquiring another business, selling part of the business, admission of new partners and amending the members’ agreement.

Although Mr Tiffin sought to argue in favour of being an employee, (that he did not have a prospect of a real share in the profits of the business), the Court of Appeal found that because he did draw a share of the profits, albeit less than the equity partners, in addition to the fact that in a winding up situation he would be entitled to a share of surplus assets and he had contributed capital to the business. This established him as a partner and not an employee.

The law does not provide for any minimum levels of capital contribution, profit sharing, voting rights to distinguish as between partners who can be employees and those who cannot.

Equity partners may, as a result of this decision, consider that they are best protected by having all their junior partners as fixed share partners, and moving away completely from the salaried partner grade.  With a relatively minimal capital contribution and the granting of limited voting rights with fixed profit share as opposed to salary, it appears that the business may escape the employment relationship and the risk of unfair dismissal and employment related claims if the relationship goes sour.

Madeleine Thomson, Head of Employment Law, Hamlins LLP:
[email protected] 0207 355 6000 www.hamlins.co.uk
Madeleine Thomson is Head of the Employment Law Department and acts predominantly for employers. Her clients span a wide range of sectors including construction, manufacturing, retail, insurance, travel, education and professional services.
She has expertise in all aspects of employment law including complex strategic issues involving TUPE, outsourcings, information and consultation on both national and cross jurisdictional restructures and transfers. She advises companies on changes to their terms and conditions of employment to reflect the latest legislation and market conditions.

As an accredited Workplace Mediator, Madeleine able to resolve workplace disputes before they escalate into employment tribunal claims.

She also provides training to directors and executives on the employment law issues that apply to every day working practices with a view to minimising the company’s exposure to risk of claims for unfair dismissal, discrimination, equal pay, whistleblowing and breach of family friendly legislation.

Hamlins LLP is a well-established, successful commercial law firm based in London’s West End. The firm has expertise in a wide range of sectors including Media and Entertainment, Retail, Travel and Leisure, and Property.  The firm’s Employment team provides a comprehensive employment law service for employers and employees including employment contracts, employee handbook and policies, flexible working requests, workplace investigations and mediations, trade unions, redundancy advice and compromise agreements.

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion

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ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion 1

(Reuters) – Exxon Mobil Corp said on Wednesday it would sell its non-operating interest in its UK and North Sea exploration and production assets to private-equity fund HitecVision for more than $1 billion.

Exxon has been looking to sell its oil and gas assets since late 2019, seeking to free up cash to focus on a handful of mega-projects.

The deal includes ownership interests in 14 producing fields operated primarily by Shell as well as interests in the associated infrastructure. Exxon could also receive about $300 million in contingent payments based on a potential for increase in commodity prices.

Exxon’s share of production from these fields was about 38,000 barrels of oil equivalent per day in 2019, the company said.

Exxon said it would retain its non-operated share in upstream assets in the southern part of the North Sea as well as its interest in the Shell Esso gas and liquids (SEGAL) infrastructure, which supplies ethane to the company’s Fife ethylene plant.

HitecVision, in partnership with Eni, had bought Exxon’s Norwegian North Sea assets for $4.5 billion in 2019.

Initially, Exxon hoped to raise more than $2 billion from the sale, which was planned for late 2019. In June 2020 sources told Reuters that the portfolio was more likely to fetch $1 to $1.5 billion given the oil price weakness last year.

(Reporting by Arathy S Nair in Bengaluru; Editing by Anil D’Silva)

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JPMorgan’s blockchain payments test is literally out of this world

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JPMorgan's blockchain payments test is literally out of this world 2

By Anna Irrera

LONDON (Reuters) – Stuck in space with bills to pay? Don’t worry, the satellites could take care of it.

JPMorgan Chase & Co has recently tested blockchain payments between satellites orbiting the earth, executives at the bank told Reuters, showing that digital devices could use the technology behind virtual currencies for transactions.

The so-called Internet of Things (IoT), where devices connect to one another, is most associated with consumer electronics, including smart speakers like Amazon Echo and Google Home, and banks want to be ready to process payments when these smart devices start doing transactions autonomously.Umar Farooq, the CEO of JPMorgan’s blockchain business Onyx, thought space was a cool place to try it out.

“The idea was to explore IoT payments in a fully decentralised way,” Farooq said. “Nowhere is more decentralised and detached from earth than space.”

“Secondly we are nerdy and it was a much more fun way to test IoT,” he said.

To run the space experiment, the bank’s blockchain team did not send its own satellites into space, but worked with Danish company GOMspace, which allows third parties to run software on its satellites.

Farooq said the satellite test showed blockchain networks could power transactions between every day objects.

The test also showed it could be possible to create a marketplace where satellites send each other data in exchange for payments, as more private companies launch their own devices into space, Tyrone Lobban, head of blockchain launch, at Onyx said.

Back on earth, examples of IoT payments that could become a reality sooner include a smart fridge ordering and paying for milk on an ecommerce site, or a self-driving car paying for gas Farooq said.

Blockchain, which first emerged as the software underpinning cryptocurrencies, is a shared digital ledger of transactions. Financial companies have invested millions of dollars to find uses for the technology hoping it can reduce costs and simplify more complex IT processes, such as securities settlement or international payments.

But so far, blockchain has yet to have widespread impact in financial services.

JPMorgan has been one of the most active banks in blockchain, announcing it had created its own distributed ledger called Quorum in 2016, which was sold to blockchain company Consensys last year. The bank also developed a digital coin called JPM Coin and in 2020 created Onyx.

Onyx has more than 100 employees and its blockchain applications are close to generating revenues for the bank, it said.

Among the division’s applications is Liink, a payments information network involving more than 400 banks, a project to replace paper checks and IoT experiments, Farooq said.

(Reporting by Anna Irrera. Editing by Jane Merriman)

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Garment workers in Thailand receive full compensation after wages expose

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Garment workers in Thailand receive full compensation after wages expose 3

By Nanchanok Wongsamuth

BANGKOK (Thomson Reuters Foundation) – Garment workers in Thailand who were illegally underpaid while making products for major brands have received all the wages owed to them after theme park operator and film producer Universal Studios agreed to pay the outstanding amount.

Universal Studios, owned by media giant Comcast Corp’s NBCUniversal, agreed to give $20,000 to a group of Myanmar workers on Wednesday – following three other global brands in making payments to settle the 3.5 million baht ($116,550) owed in unpaid wages.

“We take this matter very seriously and this is not in line with our core values,” a NBCUniversal spokeswoman said.

A Thomson Reuters Foundation investigation in September 2019 found dozens of migrants from Myanmar working at several factories in the western region of Mae Sot were paid less than the daily minimum wage of 310 Thai baht ($10.32).

A group of 26 workers at one of the factories raided in 2019 by officials sued the owner – Kanlayanee Ruengrit – in August last year for failing to pay the 3.5 million baht owed to them.

Interviews with workers by local and global rights groups found that her factory was making goods for several major brands from Universal Studios to Britain’s largest supermarket Tesco.

The workers later received a payment of about 2.88 million baht from Kanlayanee and three brands that said Kanlayanee’s factory had been subcontracted by their suppliers or partners without permission – Disney, Starbucks and Tesco.

The money from Universal Studios will be paid to MAP Foundation, which has supported the workers and been in discussion with the companies, and will distribute the funds directly to the workers.

“Since the former licensee has failed to respond to multiple requests to pay the affected Thai factory workers, we are making a goodwill donation to MAP Foundation … to distribute funds directly to the workers,” the NBCUniversal spokeswoman said.

Suchart Trakoonhutip, a coordinator at MAP Foundation, said the payment marked the first time that underpaid workers in Mae Sot had received the full amount owed to them in a wage dispute.

The Mae Sot case sets an example for other brands to follow in terms of taking responsibility, but workers should not have to rely on the goodwill of companies in order to receive money they have earned, said Ilona Kelly, a coordinator at pressure group Clean Clothes Campaign.

“The industry urgently needs binding agreements to hold brands to account, the lack of which has become even more notable during COVID-19 as millions of workers are now owed wages and severance pay,” she added.

“Without (government) legislation, the happy ending of the Kanlayanee story will continue to be as unobtainable as a fairytale ending for most workers.”

One of the Kanlayanee workers, who now works part-time on a farm, told the Thomson Reuters Foundation that he plans to send the additional money to his sick father in Myanmar.

“I feel happy and proud that I will soon receive the full amount of money I am owed,” said the worker, who spoke on condition of anonymity due to the sensitivity of the matter.

($1 = 30.0300 baht)

(Reporting by Nanchanok Wongsamuth @nanchanokw; Editing by Michael Taylor. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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