Josh writes:
Tom Rutledge posts the following over at the Kentucky Business Entity Law Blog:
LLC Members Are Not the LLC’s Employees
There is now pending before the Eighth Circuit Court of Appeals of a suit that may turn on whether the relevant question, namely whether an LLC member is an employee of the LLC, has already been determined by a state court. In that underlying judgment, the Circuit Court of Cole County, Missouri, issued a judgment dated October 9 18, 2017 in the case Joseph S. Vaughn Kaenel v. Warren, Case No.: 15 AC-CC 00472. That judgment provided in part:
As an equity partner of Armstrong Teasdale, LLP, [Kaenel] is not a covered employee protected by the Missouri Human Rights Act.
I am curious as to which case this is that is pending. Tom knows his stuff and knows (and respects) the differences between entities, so I assume there is more to than appears here.
For example, the fact that a state court determined that an LLP equity partner is not an employee does not inherently answer the question of whether an LLC member is an employee. It could, but it does not have to do so.
This prompts two thoughts. First, although LLCs are not supposed to be a hybrid of the corporation and the partnership but rather their own unique entity, courts often treat them as such a hybrid and look to the corresponding law of corporations or partnerships by way of analogy. (I suspect that the Uniform Law Commissioner's adoption of the hub and spoke model of harmonizing unincorporated entity laws has accelerated this trend.) If so, I would expect courts in this content to look to the considerable body of law dealing with whether non equity partners are partners.
Second, while pondering this issue, a thought occurred; namely, maybe we should look to securities law. If the LLC membership is a security, then the members who work for the company should be employees. By definition they lack the control associated with ownership of the business (note that owning a security is not the same thing as owning the business; sere.g., shareholders).
