4th November 2014

Scottish Life: Partners in LLPs might need to be automatically enrolled

A ruling by the Supreme Court could mean that partners in a LLP might have to be considered for automatic enrolment. We look at the court’s findings and the Pensions Regulator’s interpretation.

Background

An equity partner in a LLP (Ms Bates Van Winklehof) was expelled from the partnership after she had whistleblown on suspicious activity taking place in an associated company.

Under the Employment Rights Act (ERA) 1996, workers who whistleblow have protection against unfair dismissal. Ms Bates Van Winklehof believed that she should have been afforded this protection.

Legal wranglings

The key question was whether a partner in a LLP could be considered a worker under the ERA. As the case made its way through the legal system, different interpretations emerged.

Ultimately, the Supreme Court ruled that a partner in a LLP is a worker for the purposes of the ERA, and therefore should have whistleblowing protection.

TPR's interpretation

TPR now say that because of this ruling, partners in a LLP might have to be treated as workers for automatic enrolment. They also say that this ruling should be applied retrospectively.

This means that if there are partners of a LLP in an employer who has already staged, they will need to be assessed. If they are treated as eligible jobholders, then they will have to be automatically enrolled now, and employer back contributions will need to be paid from the staging date.

Action points

If you have any clients who might be affected by this ruling, the first port of call should be TPR's Compliance and Enforcement bulletin that summarises the ruling and TPR's interpretation.

Remember that even if a partner is treated as a worker and the employer duties apply, they might not have to be automatically enrolled. For example an equity partner with no other income will not have qualifying earnings and so would simply be treated as an entitled worker.

If, having read through the TPR guidance there are still some doubts, legal advice should be sought.

In depth:Read the Supreme Court ruling in full

About the author

Jamie Clark, Business Development Manager

A self-confessed 'Pensions Geek', Jamie reads Pensions Acts for breakfast. He's spent the last two years working on automatic enrolment and has talked to hundreds of advisers and employers about how they can best prepare.

Pensions, Auto-Enrolment