A “triangular employment relationship” occurs when an employee of one employer works under the control of another person. When this happens, the identity of the real employer can become a little hazy.
Some good examples of potential “triangular employment relationships” are labour hire workers and temp workers. If a triangular employment relationship is established, the labour hire worker or temp worker could bring a personal grievance against their employer as well as the person they actually do the work for.
Now, from 27 June 2020, the Employment Relations Act 2000 will allow employees in a “triangular employment relationship” to bring personal grievances against the person who controls their work, as well as their employer.
However, there needs to be a more than the appearance of a triangular employment relationship for such a personal grievance to succeed. In order to be able to bring a personal grievance against the person who controls their work (known as the “controlling third party”), the employee must show:
- The controlling third party gets the benefit of their work;
- The controlling third party exercises control and direction over the employee that is similar or substantially similar to the control and direction an employer exercises; and
- The controlling third party caused or contributed to the personal grievance while the employee was working under their direction.
There isn’t much guidance in the legislation about what all of this means. But we think that if the alleged controlling third party does things like telling the employee how to work or when to turn up, has control over the employee’s pay rates, and control over hiring and firing, then it’s likely they could be joined to any personal grievance as a controlling third party.
The controlling third party also needs to “cause or contribute” to the personal grievance while the employee is working under their direction to be liable for a personal grievance. Once again, there isn’t much guidance in the legislation about what this means but an example might be where a controlling third party says they don’t want a particular labour hire worker on their site anymore and tells the employer to get rid of them.
The employee must still notify the employer of the personal grievance within 90 days. However, if either the employee or the employer think the personal grievance arises out of an action by a controlling third party, then they can ask the Employment Relations Authority or Employment Court to join the controlling third party to the personal grievance. The controlling third party still needs to be notified of the claim by either the employee or the employer within 90 days.
It is quite interesting that the employer has the power to apply to join the controlling third party to the personal grievance. While it might help the employer avoid liability for any personal grievance, it might also create commercial friction between the employer and the controlling third party.
If all of this happens and the Authority or Court decides the employee has a personal grievance, then they can apportion remedies against either or both of the employer and the controlling third party, except reinstatement against the controlling third party.
The legislation is very much open to interpretation in a number of areas. However, that’s to be expected with employment legislation that tries to regulate new types of employment arrangements, like those arising in the “gig economy”, and “zero hours contracts”.
It’s worth nothing that this new law doesn’t stop employees from arguing that they’re really employees of someone else, like in Prasad & Tulai v LSG Sky Chefs New Zealand Ltd. There, labour hire workers were in fact employed by the flight catering company where they worked, even though they had contracts saying they were employees of another entity.
In the meantime, organisations who have labour hire workers or temp workers on their sites, or who control the work done by another employer’s employees could take the following steps:
- Review their relationship with the employee’s employer to be clear about who controls which aspects of the employee’s work;
- Ensure there are clear and well written contracts governing the parties’ relationships;
- If there is the risk of a personal grievance and it’s commercially viable to reduce that risk, to consider how that might be reduced; and
- Discuss liability and the apportionment of any liability with the employee’s employer in the event of a personal grievance.