Employment Status - Employee or Partner?

In Williamson & Soden Solicitors v Briars, the Employment Appeal Tribunal (EAT) considered the employment status of a solicitor who was described as a partner of the firm and whose remuneration was by way of a ‘guaranteed profit share’ plus a share of the net profits of the firm.

Mr Briars began working for Williamson & Soden (WS) in November 2001. He was made a salaried partner on 1 May 2003 but it was common ground that he remained an employee of the firm.

In May 2004, new arrangements were agreed whereby instead of being paid an annual salary of £55,000, Mr Briars would receive a guaranteed profit share of £55,000 together with a percentage of the firm’s net profits. The change meant that he paid Income Tax and National Insurance on a self-employed basis. The new arrangement was confirmed by letter. This made reference to the ‘partnership agreement’, but there was dispute amongst the parties as to whether this referred to the agreement entered into by Mr Briars when he became a salaried partner, as he thought, or to the agreement that existed between the equity partners, as contended by the firm. No mention was made in the letter of any change in Mr Briars’ title or status.

When Mr Briars subsequently left the firm and brought a claim of unfair dismissal, WS argued that his claim could not be heard because he was a partner of the firm, not an employee. In determining Mr Briars’ employment status, the Employment Tribunal (ET) considered all aspects of the employment relationship. Under the new agreement, the benefits of his existing contract were to continue as before, and he had no capital stake in the firm, nor would he carry any of the financial risks. The firm retained a significant degree of control over his work. He was required to meet targets set by the partners and had at one time been moved ‘sideways’. Nor was he consulted over matters essential to the running of the business.

The ET found that WS had not intended Mr Briars to be an equity partner in the firm and the effect of the 2004 arrangements would be that he was subject to the same terms as before except in respect of his remuneration.

WS challenged the ET’s approach, arguing that it had erred in law in failing to direct itself in accordance with the Partnership Act 1890. It should first have considered whether the relationship between Mr Briars and the partners was one in which they were ‘carrying on a business in common with a view to profit’.

The EAT rejected this argument. The question to be determined by the ET was whether Mr Briars was an employee, which was a question of fact to be decided by applying the appropriate legal tests. In the EAT’s view, there is no point of law that the ET should address the question of partnership first and ‘a principle that it should generally have regard to the terms of the Partnership Act in resolving any disputed question of employee status where that is relevant must not be elevated into a rule of law’.

Furthermore, on the facts of the case there was no other conclusion to which the ET could reasonably come. The conduct of the parties was consistent with Mr Briars being an employee and, had the firm’s intention in 2004 been to change his status, the paperwork would surely have made this clear, given the onerous responsibilities involved in being a partner.

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