var q = Employees.Join(
Employees.Where(em => (em.failed == 0) ).GroupBy(u => u.id).Select(grp => new {id= grp.Key, version= grp.Max(t => t.version)})
,e => new {e.id, e.version}
,o => new {o.id, o.version}
,(e, o) => e
);

/* Тестовая таблица */
CREATE TABLE [dbo].[Employee](
	[id] [int] NOT NULL,
	[version] [int] NOT NULL,
	[failed] [bit] NOT NULL,
	[name] [nchar](10) NULL
) ON [PRIMARY]

/* Ентить */
public class Employees
{
	public int Id {grt; set;}
	public int Version {grt; set;}
	public  bool Failed {grt; set;}
	public string Name  {grt; set;}
}

 
/* Запросец */
var q = Employees.Join(
Employees.Where(em => !em.Failed ).GroupBy(u => u.Id).Select(grp => new {Id= grp.Key, Version= grp.Max(t => t.Version)})
,e => new {e.Id, e.Version}
,o => new {o.Id, o.Version}
,(e, o) => e
);

q.ToList();

/*
 Запрос на выходе
*/
SELECT [t0].[id] AS [Id], [t0].[version] AS [Version], [t0].[failed] AS [Failed], [t0].[name] AS [Name]
FROM [Employee] AS [t0]
INNER JOIN (
    SELECT MAX([t1].[version]) AS [value], [t1].[id]
    FROM [Employee] AS [t1]
    WHERE NOT ([t1].[failed] = 1)
    GROUP BY [t1].[id]
    ) AS [t2] ON ([t0].[id] = [t2].[id]) AND ([t0].[version] = [t2].[value])