The growing use of labour hire companies, and companies outsourcing work to contractors, means more and more employees are at the mercy of third party contracting.
We’re referring here to a situation where an employer has a commercial contract with a third party, who effectively tells the employer what it wants it to do with its own employees. So the question is, what does this mean for the employees?
This situation arose in the Employment Court case of Workforce Development v Hill  NZEmpC 174. Ms Hill was employed as a tutor by Workforce Development, a private provider of adult literacy training. Workforce Development had a contract with the Department of Corrections to provide tuition to prisoners. So while Ms Hill worked for Workforce Development, the work she was doing for them was at a Department of Corrections prison site. It is also relevant to note that the commercial contract between Workforce Development and Corrections provided that Corrections could withdraw a tutor’s access to a prison on an interim or permanent basis, in its sole discretion.
Ms Hill took an overseas holiday and while away sent a postcard to a prisoner. She said that it was to encourage the prisoner to develop his learning, but Corrections took the view that the postcard breached appropriate boundaries between Ms Hill and the prisoner. She was suspended from the prison and subsequently her access was cut off completely. She was dismissed by Workforce Developments as she could no longer do work at the prison site and it had no other job she could do. Ms Hill alleged that she had been unjustifiably dismissed.
The Court did not accept the claim and held that Ms Hill’s dismissal was justified. The following points are relevant for employers dealing with tripartite employment relationships:
- An employer still has an obligation to ensure that any dismissal or disciplinary action it takes is what a fair and reasonable employer could take in the circumstances, and in doing so it must follow a fair and reasonable process;
- An employer will have an obligation as a matter of good faith to try to retrieve the situation, however, it was not part of a good employer’s obligations to “strongly advocate” for Ms Hill’s renewed access to the prison, even though it would have been possible for the employer to have done so;
- The employer did not have to persuade Corrections to consider Ms Hill as its own employee in assessing whether she should be allowed to access the prison; and
- The employer was under no obligation to seek some form of “review” or “appeal” of Corrections’ decision to refuse access to the prison.
The Court also confirmed that the employer had to turn its mind to whether there were any redeployment possibilities for the employee (once the employee couldn’t go back to the worksite) and to take active steps to investigate any possibilities. On the basis that there were no such options, the Court said that the employer was entitled to terminate the employment relationship.
What this case also demonstrates is that in a tripartite employment situation it is important that the employment agreement and the contract with the third party deal with scenarios which may prevent an employee accessing the workplace. Usefully for the employer in this case, the employment agreement referred to an obligation to observe Corrections’ policies, and had set out the process it would follow in the event of loss of access to the prison.