Summary Description:
Claimant found to be a partner, rather than an employee, and could not bring a claim for unfair dismissal.

Background:
The claimant commenced his work with the respondent in October 2010 as a trainee tax consultant. He gained tax adviser status and continued to work for the respondent. In March 2019 discussions were entered into about the claimant becoming an equity partner. This took effect in April 2019 and the claimant ceased to be on the respondent’s payroll and stopped receiving payments to the auto-enrolled pension scheme. He also received a P45 stating his leave date was 23rd April 2019. There were then subsequent discussions about the rate of pay as well as some holiday entitlement. The claimant also sought a draft partnership agreement but there had been some delays. The draft did come forward but there were a number of issues raised by the claimant. The claimant was stating at that point that his employment contract was still effective from before. The partnership was brought to an end in June 2020. The claimant sought to bring a claim for unfair dismissal.

Outcome:
The Tribunal had to determine the employment status of the claimant to determine his eligibility for the right not to be unfairly dismissed.  At first instance, the Tribunal found that the claimant had moved from being an employee to being a partner, under the Partnership Act 1890, and thus was no longer an employee. They did find that he was a worker, though.

The claimant appealed. It was agreed that the existence of a partnership under the 1890 Act would be inconsistent with the existence of a contract of employment it was still argued by the claimant that the Tribunal had erred in finding that he was in partnership. This was largely on the basis that there was no partnership agreement actually agreed between the parties. The EAT dismissed the appeal citing that there was a multifactorial approach to be taken looking at the genuine intention of the parties as to whether there was a partnership. The EAT acknowledged that where there is a salaried partner it could be for the purposes of the 1890 Act or it could be a situation of employment. The EAT agreed that the balanced tipped in favour of the partnership considering the arrangement between the parties including the fact that he had been taken off payroll and was given a P45.

Practical Guidance for Employers:
This serves as an interesting case when it comes to employees who are being made partners. The EAT outlines that the genuine intentions of the parties have to be considered rather than it being one looking for the partnership agreement in writing. As a result, it was found the facts tipped in favour of partnership meaning that no unfair dismissal action could be taken as there was no status of employee. This is something to consider in those industries which are largely governed by partnerships and the implication it can have on the rights and responsibilities arising in the course of work.

The full case review is here:
Mr_Christopher_Watson_v_1__Wallwork_Nelson_Johnson_2__Mr_Ian_Johnson__2024__EAT_105.pdf (publishing.service.gov.uk)