Posted on: Feb 13, 2018

Another Bill has been recently introduced to Parliament intending to amend the Employment Relations Act.  The latest Amendment Bill focuses on triangular employment relationships, and seeks to ensure that employees employed by one employer, but working under the control and direction of another business or organisation, are not deprived of the right to coverage of a collective agreement, and to ensure that such employees are not subject to a detriment in their right to allege a personal grievance.

While this Bill is only in the early stages, if it is passed into legislation it could have major implications for many businesses, particularly those that utilise temporary labour resources (and of course the temp agencies themselves).

What is a tri partite or triangular relationship?

A tri partite (or triangular) relationship is 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.  In the Employment Relations (Triangular Employment) Amendment Bill the third party/end user is referred to as the “secondary employer”.  This is most commonly seen in labour hire companies, temp agencies and employees that have been seconded elsewhere. Through these types of commercial relationships, employees who provide their services to a third party have often challenged the real nature of the relationship, claiming that the conduct of controlling third parties has resulted in an implied employment relationship.

This has led to employees claiming they are employed by both the temp agency and the business in which they have been placed.  This claim is typically pursued for the purposes of enabling an employee to raise a personal grievance against the business in which they have been placed.

Case law on tri partite relationships

To determine whether an employee has become employed by the end user (which is typically what companies using temp agencies try to avoid), the Employment Court applies the real nature test found in s6 of the Employment Relations Act.   The leading case where the Court has examined triangular employment relationships is outlined below.

Mc Donald v Ontrack

Mr Mc Donald was employed by Allied Workforce (AWF). AWF was and still is a labour hire company that provides employees on a casual basis to clients to cover for businesses that need casual staff for the day. AWF had a contractual arrangement with Ontrack regarding the use of AWF staff. However, Ontrack requested that Mr Mc Donald sign a separate employment agreement before resuming his placement (which is very unusual and an important factor in this case). The second employment agreement that was signed allowed Mr Mc Donald to bring a personal grievance for an unjustified dismissal against Ontrack despite Ontrack and AWF maintaining their position that Mr Mc Donald was employed solely by AWF during the entire time.

In this case, the Court:

  • Reinforced that the identity of the employer in a triangular relationship is a “factual exercise”.  It is important to analyse the relationship and determine whether the conduct of the parties reflects a genuine tri partite relationship or whether an implied contract of service exists.
  • Referenced s6 of the Act and could see the potential that people like Mr Mc Donald had to argue that he was employed by an entity at the third point of the triangle.
  • Recognised that examining the real nature of the relationship must not disregard the contractual principles of offer and acceptance, ignoring any contract for service that has been formed.
  • Expressly stated (to avoid any confusion), that it would be best practice to identify the employer at the outset. If at any point during the employment relationship there is a change in the relationship and it no longer reflects the initial agreement, the onus is on the employee to establish on the balance of probabilities who the employer is and whether a contract of service between the employee and the end user exists.

Overseas law

Case law from other jurisdictions held that an implied contract did exist with an end user where an individual was recruited by an agency but had no further contact with the agency from that point except that the agency paid their wages. The individual was interviewed by the end user and the end user provided them with clothing, protective equipment and a vehicle. Subsequently the individual negotiated a pay increase directly with the end user, he was subject to discipline by the end user and was required to seek permission from the end user to take holidays.  The Tribunal in this case implied a contract of employment between the individual and the end user did exist to reflect the reality of the relationship.

Possible, but not probable

Cases where an employee of one employer becomes the employee of another is rare. There has to be a significant event or series of events which distinctly defines a new employment relationship being formed.

Where to from here?

It’s all a bit daunting!  It seems that this Employment Relations (Triangular Employment) Amendment Bill will take away the underlying need for employees to challenge the real nature of the employment relationship.  If passed into legislation as it currently drafted, this Bill will enable employees, whom perform work under the control or direction of a secondary employer (the third party/end user) in a way that is substantially equivalent to that of an employee, to raise a personal grievance with the secondary employer.  In accordance with this proposed Bill, the ability to raise a personal grievance with the secondary employer will become a rite of passage for all employees whose circumstances fall within the defined parameters.

Don’t forget that the Bill also proposes to allow coverage of a collective agreement for employees performing work for a secondary employer where that work is within the coverage clause of any collective agreement to which the secondary employer is a party (and those employees are a member of the union party to that collective agreement).

Needless to say, for temp agencies and employers currently engaging temporary labour via a triangular relationship, this change would be significant and requires a complete rethink on temporary resourcing as we currently know it.  However, let’s not get too far ahead of ourselves just yet, and wait and see how this Bill progresses first.  We will keep you updated if and when any important changes occur. In the meantime, feel free to touch base with us if you have any questions or concerns, or to read the proposed Bill click here.















This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.