Posted on: Aug 06, 2020

With the Employment Relations (Triangular Employment) Amendment Act 2019 officially coming into force on 27 June 2020, it is timely for employers and employees to be mindful of their current employment relationship structures and be aware of the new obligations the law creates in relation to personal grievances.

Despite labour hire/temping agencies being a commonplace in today’s modern labour market, this law was introduced to, in the current Government’s view, provide greater protections for those who may work in triangular employment relationships when it came to personal grievances. Previously employees in triangular employment relationships had a limited ability to bring a personal grievance claim against a 3rd party organisation. Some may say this was a solution looking for a problem!

This amendment allows individuals in triangular employment relationships to pursue a personal grievance against their ‘host organisation’, (or the 3rd party), by joining that organisation to their personal grievance claim, despite there being no employment relationship. The amendment increases the rights of those individuals who find themselves in triangular employment relationships and creates obligations and corresponding potential liabilities for 3rd party organisations using workers.

This raises several questions for businesses:

  1. What is a triangular employment relationship?
  2. What are my potential obligations if our business is the 3rd party?

 

What is a triangular employment relationship?

To fully understand how this new law applies, it is important to be able to identify a triangular employment relationship. The image below provides an example of a triangular employment relationship, where Company A is “the 3rd party” and Company B is the “Employer”.

 

What are my potential obligations or risks if our business is the 3rd party?

As mentioned above, where a “Worker” is not your employee, but you are the 3rd party, you may be joined to a personal grievance by either the Worker or their Employer. This can place a number obligations on you as a 3rd party:

  1. The requirement to participate in any process to resolve the personal grievance i.e. Employment Relations Authority investigations, mediation, Employment Court hearings or other processes required by law.
  2. If a personal grievance is found to be valid you may be found liable for any fines, compensation or penalties that may be awarded.

If it is determined that the controlling 3rd party’s conduct has caused or contributed to the employee’s personal grievance, the ERA may order the controlling 3rd party to reimburse the employee for lost wages and/ore compensate the employee. The remedies awarded against the controlling 3rd party and/or employer must also reflect the extent to which these parties have caused and contributed to the employee’s personal grievance.

 

How does this happen? What is the process?

To raise a personal grievance in the context of a triangular employment relationship, an employee must first raise the personal grievance with their employer within 90 days in relation to the conduct by the “controlling 3rd party” that is alleged to have occurred whilst working under the control of the 3rd party.

Within 90 days of that claim being made, either the employee or employer needs to let the controlling 3rd party know that, in their view, the controlling 3rd party’s conduct has caused or contributed to the employee’s personal grievance.

It is then only once proceedings have commenced in the Employment Relations Authority (ERA), not before, that the employee or their employer must apply to the ERA to join the controlling 3rd party to the grievance. To join a 3rd party to the grievance, the ERA will consider:

  1. Whether the host organisation was/is a controlling 3rd party; and
  2. If the controlling 3rd party was adequately notified of the personal grievance it is arguable that the controlling 3rd party’s conduct has caused or contributed to the personal grievance.

It is important to note that the ERA (or the Employment Court) may, at any stage of the proceedings, of its own motion join a controlling 3rd party to the proceedings.

 

Impact of this new law

Ultimately, this new law means that 3rd parties are now exposed to the risk of claims of unjustified dismissal or unjustified actions towards their contractors/temps/labour-hire workers.

This may bring its own new set of challenges – for example, if the ERA decides to join a controlling 3rd party to the proceedings, it may result in all three parties attending mediation. Realistically, it may be that these three-party mediations will be difficult and complex since all parties will have competing interests. This will possibly make it harder to reach a settlement.

It is also predicted that this new law may strain the commercial relationships between controlling 3 parties and businesses, as the parties may attempt to shift the blame onto the other to avoid exposure. It may also heighten the obligations of the controlling 3rd party.

 

The outsourcing of employer responsibilities to temp agencies has always been a contentious subject for Unions and Employees. This new law therefore offers a new pathway and solution for employees in these arrangements as they no longer need to take on the legal challenge of proving that the 3rd party was their “employer” per se. However, with the changing future of what work looks like in New Zealand and the normalisation of flexible working, there are critics who question how this will operate in practice. It may be that this legislative change goes against the high productivity, high income economy currently envisaged for New Zealand as it’ll create more obligations and barriers for employers/businesses to overcome.

These are both interesting considerations to keep in mind for when we finally see the law applied in practice.



Disclaimer

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.