The normal workplace relationship is a simple two-party arrangement – employer and employee and is the basis on which the employment law has been developed.
Triangular Employment Agreements are agreements between an employee, their direct employer, and a client of the employer. In the bill, the client is called the “controlling third party” (Lets call them the C3P going forward, for clarities sake!) The employee works for the C3P as if they were an employee; but always remains an employee of the employer.
The best and most obvious example of this is a Labour-Hire arrangement, where the employer is the labour hire company, but the employee works for whomever the labour hire company sends them to.
Normal Employment Relationship
Triangular Employment Relationship
This model is very popular with companies who need short term staff for specific projects and have no reason to enter into permanent or even long-term arrangements with employees. They also struggle to recruit employees for this kind of work because the need is usually immediate, and the recruitment process can sometimes take longer than the work itself!
Many companies in NZ have overseas ownership and sometimes policy decisions like headcount freezes mean companies cannot recruit, but they still need to deliver! In these cases, labour hire employees are the solution because they are classified as an expense, not a payroll cost.
Labour Hire companies have capitalised on this gap in the market to hire available people as their own employees, and then offer them to companies needing labour. This offering reduces the recruitment process and adds in a guarantee of suitability for the C3P, and a quick solution for getting rid of a non-performing person.
The weakness in this arrangement has been found when the employee experiences difficulties in the workplace. It could be harassment, bullying, or even a safety issue which is not being addressed. The workplace is in fact the workplace of the C3P, but the employee is the employee of the employer.
Currently employees can only bring a personal grievance or declare a dispute against their employer, who in these cases has nothing to do with the circumstances creating the employment issue. The employer therefore is the wrong person to bring a dispute against, but the C3P (the manager of the workplace where the problem has arisen) and the employee have no legal relationship.
Enter the Employment Relations (Triangular Employment) Amendment Bill. This bill will become law shortly, and come into force in 12 months’ time (around June 2020), and will allow an employee (or the employer, in fact) to apply to the ERA to join a third party (the C3P) to a personal grievance claim, and for remedies (damages, loss of salary, etc) to be apportioned between the responsible parties.
What this law will mean remains to be seen. A Labour hire company may now have good reason to audit their clients; and have a vested interest in the kinds of workplaces their employees are placed into. A client may be encouraged to better monitor and manage the working environment of their non-employees.
This bill will require better working relationships between Labour Hire companies and their clients, but whether this leads to tension or teamwork remains to be seen.
A Labour Hire company may not want to jeopardise a lucrative client relationship by joining them if a single employee has a grievance, and conceivably might face pressure by the C3P to resolve it before formal proceedings commence. They also might be unpopular if their employee knows their rights and independently joins the C3P to the matter as well!
If they discourage or attempt to discourage an employee from doing so, they may breach good faith standards and the employee could then lodge a separate personal grievance against them for that!
A note: This amendment bill leaves an interesting gap in the dispute timeline, which will no doubt be exposed and corrected at some point – between the lodging of a personal grievance with the employer, and the ERA process, lies the mediation stage, which, as it stands, cannot have the third party joined to it (Joining is done by application to the ERA, which has no knowledge of disputes at the mediation stage). This means that the process of resolving a dispute early and avoiding the high costs of the ERA process, is weakened because a very interested party is simply unable to participate (it has no legal standing to do so).
In the end though, this new amendment will create a far more equitable situation as regards dispute resolution, by making the party who may have created the workplace situation, accountable for their behaviour.
Our recommendation is that Labour Hire Companies develop policies and business practices that enable them to exert a positive and proactive influence in this Triangular Employment relationship and minimise the possibility of workplace disputes where they have previously lacked any form of control and influence.