Employee : Kovats v TFO Management LLP

Kovats v TFO Management LLP: UKEAT/357/08

EAT: Judge Birtles QC, Mr T Motture, Mr D Welch

The respondent was a limited liability partnership incorporated under the Limited Liability Partnership Act 2000 providing investment advice to high net worth individuals.

The claimant was recruited as its chief investment officer to manage the London office and investment teams in London and Bahrain. He signed membership agreements and a side letter as a partner, agreeing to devote all his working hours to the partnership and any other time when necessary subject to agreed holiday arrangements and sick leave. He received a fixed membership distribution as a draw down against future profits, which he opted to have paid gross, and paid class 4 national insurance contributions.

There was dissatisfaction with his performance and a resolution was passed at a members' meeting requiring the claimant to retire from the membership.

He made a complaint of unfair dismissal, and, on a preliminary issue of jurisdiction as to whether the claimant was an employee, an employment tribunal found that, while there were many features of the relationship between the parties that were similar to an employment relationship, the parties had intended to create, and at
all material times genuinely and rightly considered it to be, a partnership arrangement.

The tribunal held that the claimant's role as chief investment officer was not inconsistent with the duties carried
out by the members pursuant to the members' agreement or with those generally undertaken by partners in a partnership and that, accordingly, he would not "be regarded for that purpose as employed by the partnership" for the purposes of the test in section 4(4) of the 2000 Act.

His complaint was dismissed.

The claimant appealed.

The Employment Appeal Tribunal held:

In determining whether a member of a limited liability partnership was employed by the limited liability partnership, for any purpose, including the Employment Rights Act 1996, section 4(4) of the Limited Liability Partnership Act 2000 provided that the same criteria applied as would determine whether, for that purpose, he would be a partner or an employee of a partnership in the ordinary sense. Applying that test, the tribunal was required first to consider whether the claimant was a partner in the partnership and then to consider whether the common law tests would have conferred employment status on him. The tribunal had applied the right test and correctly concluded, on the evidence, that the claimant was carrying on business in common with his fellow members with a view to profit and was not an employee.

The appeal was dismissed.