Can someone described as a partner ever have employment rights and can someone described as an employee ever be deemed a partner?

First, it is important to understand that there are two very different kinds of ‘partnership’ with quite different rules: traditional (unlimited) partnerships and the more modern, and increasingly common, limited liability partnerships (LLPs).

In his Autobiography, Morrissey is scathing about Weeks J relying on the Partnership Act 1890 when analysing the Smiths as a partnership, as though the judge had gone to great efforts to unearth an ancient statue just to find against the ‘devious, truculent and unreliable’ Morrissey, whereas this was exactly the right legislation to apply to membership of a traditional partnership. Of course, as many Smiths fans will agree, the finding that the Smiths was a partnership of equals was deeply unjust (my own view: Marr 50%, Morrissey, 40% and Rourke and Joyce 5% each).

The Partnership Act 1890 defines partnership as ‘the relation which subsists between persons carrying on a business in common with a view of profit’ – it doesn’t need a deed or a declaration of partnership, merely the carrying on of business in common with a view to profit. It was for this reason that, many years ago at a mediation, I successfully negotiated a compensation payment for an architect whose contract said he was an employee but who, on his account, had begun to carry on business in common with his former boss.

Equally, a partnership may call someone a partner but, if they are not carrying on business in common with a view to profit, they will not be a partner. For many years (at least until they nearly all became LLPs) law firms have had ‘salaried partners’ who are presented to the outside world as partners but everyone within the firm understands that they are, legally, employees.

Even junior partners who received an element of profit share can be employees, such as Mr Briars who brought a claim against Williamson & Soden Solicitors.  He received a ‘guaranteed profit share’ of £55,000 together with one-eighteenth of the net profits of the firm (anticipated to be in the region of a further £10,000).  He had no risk of sharing in the firm’s losses, no capital stake and was not consulted about significant events in the life of the firm. The Employment Appeal Tribunal confirmed that he was, indeed, an employee.

For a while, people wondered whether a junior members of LLPs could assert that they too were employees. Warren J in Reinhard -v- Ondra largely put paid to that when he declared that one could never be a member of an LLP and an employee.

Don’t assume, however, that this was a defeat for Mr Reinhard – he was not a junior partner seeking employment rights; he was a senior member of staff seeking to show that he had an equity share. Despite the fact that he had not signed the LLP agreement, the judge held he was, in fact, a member of the LLP (and therefore could not also be an employee, even though that is what he contract said he was).

Now that LLPs are beginning to eclipse unlimited partnerships, the risk (or opportunity) is less that LLP members will be able to claim employment rights and more that senior staff will be able to declare themselves members. Meanwhile, elsewhere, unlimited partnerships my be spring into existence between people (such as Morrissey, Marr, Joyce and Rourke) who have no idea that they are suddenly bound by the Partnership Act 1890.