What will the Triangular Employment Act change?

by Sarah Townsend, Partner and Hamish Rossie, Law Clerk, at Duncan Cotterill

• The Employment Relations (Triangular Employment) Amendment Act 2019 (Triangular Employment Act) will extend the statutory personal grievance mechanisms to employees who perform work for ‘controlling third party’ organisations.
• The Triangular Employment Act is due to come into force on 27 June 2020.
• Employees and employers will now be able to apply to join ‘controlling third parties’ to personal grievance proceedings.

Analysis
The new legislation, which is due to come into force this month, will have a significant impact on labour-hire organisations and those employers with temporary or fluctuating workforces. The Triangular Employment Act specifically applies to triangular employment relationships, often described as “labour-hire” arrangements, where the employee is employed by one organisation but performs work under the control and direction of another entity or organisation.

The current position
Prior to the Triangular Employment Act’s passage through Parliament, the Employment Court had assigned ‘employer’ status to third parties as the controlling organisation in labour-hire situations.

In Prasad v LSG Sky Chefs New Zealand Limited [2017], the Employment Court considered that as the third party exercised significant direction and control over the workers day-to-day work, the Court could find the existence of an employment relationship between the contractor and the third-party. The issues which the Court grappled with in Prasad v LSG Sky Chefs are now being addressed by the Triangular Employment Act legislation.

Currently, employees face significant difficulties in pursuing personal grievances based on the actions of parties other than their employer. The present position is that an employee must first prove that the nature of their relationship with the secondary party is one of employment. Proving this is usually very difficult in situations of secondment or labour-hire arrangements where the employee has an employment agreement with, and is paid by, the primary employer.

What will the Triangular Employment Act change?
The Triangular Employment Act will remove the current difficulties in pursuing personal grievances against third parties. The Triangular Employment Act will insert 16 new clauses into the Employment Relations Act 2000 (ERA) which will recognise the position of employees working under the direction of someone who is not their employer.

The Triangular Employment Act broadens the reach of the personal grievance mechanism for these employees. Employees in the relevant working arrangement will have, under section 103B of the Employment Relations Authority, the ability to apply to join a controlling third party to an existing personal grievance claim against their employer.

This is subject to the same 90-day notification period within which the employee can raise a personal grievance against their employer. An employer can also apply to join a controlling third party to a personal grievance proceeding they are facing, provided they notify the controlling third party within 90 days of the personal grievance being raised.

If an employee is successful in their personal grievance, the Court / Authority will be required to consider the extent to which the employer and the controlling third party caused or contributed to the personal grievance in apportioning any award of reimbursement and/or compensation.

The Triangular Employment Act recognises that a growing number of New Zealanders work in triangular employment relationships and aims to provide more robust protections to employees. Industries that this change is likely to affect are those involved in labour-hire arrangements, those in sectors affected by seasonal fluctuations, those who hire a temporary workforce, and employees on secondment from their employer to another business or organisation.

Businesses within these industries should re-examine their commercial relationships, contractual procedures, liability and indemnity arrangements in light of the new Triangular Employment Act.

For more information, please contact a member of the Duncan Cotterill employment team.

Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.