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. This law will particularly affect users of labour supplied by labour hire companies, and the labour hire companies themselves.
We reported on this new piece of legislation in late 2019, but given it will come into force imminently it is timely to consider some important issues that may arise.
Essentially, the law will now provide the ability for employees and employers to join a “controlling third party” to an employee’s personal grievance claim.
A “controlling third party” is an entity that has a contract or arrangement with an employer where the controlling
third party gets the benefit of the employee’s work, and exercises control and direction over the employee that is
similar or substantially similar to the control and direction an employer exercises.
The essential purpose of the law is to allocate liability for remedies between the employer and controlling third party, where the controlling third party has caused or contributed to the personal grievance.
Key to the ability to pursue a controlling third party is notification of the personal grievance to the controlling third party occurring in time. An employee must do this within the same 90 day period for raising personal grievances as applies to their employer. Employers can also notify the controlling third party of the personal grievance within 90 days of having received the employee’s personal grievance. The law then deals with the formalities of the controlling third party actually being joined to a claim that is filed in the Employment Relations Authority.
In practice, we expect employees who believe a “controlling third party” has some potential liability in their claim will try to involve such a party at an early stage of their grievance. There may however be circumstances where an employer (such as a labour hire company) might wish to avoid having an entity with which they may be in a commercial relationship (such as their client user of temporary labour) involved. We expect such commercial considerations may be as important for employers and controlling third parties as actually dealing with a grievance.
Given this law, employers who engage labour hire or temp workers, or who have employees working for or at other commercial parties, should be thinking carefully about how they manage that relationship. Further, commercial parties will likely be wise to consider, as part of their commercial agreements, whether it is appropriate to provide for such matters as indemnification for liabilities and costs, and any processes for dealing with employees’ complaints.