New Zealand: The ‘Triangular Employment’ Bill is back before Parliament
Employment Update – April 2019
The Employment Relations (Triangular Employment) Amendment Bill had its second reading in parliament on 3 April 2019. The Bill’s second reading follows the Select Committee report on the Bill in late 2018. The Committee recommended a number of amendments to the Bill, which were approved (by a majority) at its second reading.
This article explains what the Bill is, what the changes made by the Committee were, and what the Bill’s impact is likely to be, should it pass into law.
The phrase ‘triangular employment’ has been used to describe a traditional “labour hire” situation where the “employee” is employed by one organisation, but performs work under the control and direction of another enterprise or organisation. It would also cover secondment arrangements.
In New Zealand, the status of “employee” comes with a long list of statute-protected rights. The aim of the Bill is to enhance and protect these rights for employees who perform work in labour hire arrangements, but who might not otherwise be able to access the protections in the Employment Relations Act 2000.
Relevant Case law on Triangular Employment Relationships
The introduction of the Bill is timely; employers, and those who contract with labour hire companies for labour hire arrangements, are alive to the scrutiny on relationships with temporary labour forces. Recent case law has highlighted the Employment Courts’ view on triangular employment relationships. In particular, the Employment Court has assigned ’employer’ status, and the corresponding liability, to a third party (the controlling organisation) in labour hire situations.
In Prasad v LSG Sky Chefs New Zealand Limited, the Employment Court considered the situation of two individuals in an independent contractor relationship with Solutions Personnel (a labour hire company). Solutions Personnel, in turn, contracted with LSG to provide services from the two individuals to LSG. The Court found that the two individuals were employees of LSG. While the Court acknowledged the complexities in employment arrangements of this kind, it turned to the traditional tests of establishing an employment relationship, and determined that as LSG Sky Chefs exercised significant direction and control over the workers day-to-day work, this pointed towards there being an employment relationship between the parties.
The Bill aims to address the issues the Court grappled with in Prasad v LSG Sky Chefs. The Bill, as presented to the Select Committee, proposed two major protections for employees in a triangular employment situation:
- granting those employees the right to be covered by a collective agreement that employees of the controlling third party are party to; and
- providing a system for employees to raise personal grievances with their employer and for the controlling third party to be joined to the proceedings, where relevant.
Select Committee Amendments
In its report, the Committee suggested a number of substantial changes to the Bill.
- Change to key definitions: The Committee recommended changing the statutory definitions of the parties in the triangular employment relationship. It suggests changing “primary employer” to “employer” and “secondary employer” to “controlling third party”. This clarifies the relationships between the three parties, recognising that while the third party is not always going to be found to be an employer, it will exercise control or direction over the employees work.
- New framework for personal grievance provisions: The Committee has amended the framework in the Bill for workers in triangular employment arrangements to raise a personal grievance with their employer and join the controlling third party to the proceedings. The framework sets out relevant timeframes and requirements for bringing proceedings against a controlling third party, making it easier for workers to do so.
- No right to join a collective agreement: The Committee’s strong recommendation was to remove the provisions of the Bill that require workers to be bound by the same collective agreement as the employees of the controlling third party. This change recognises the fact that employees often work for a number of different “controlling third parties”, especially in true labour hire situations, and it would be impractical for such employees to be bound by various different collectives.
Where to now?
The Bill will now progress to its third reading. If it passes here (and it is likely that it will, based on the unanimous collation support, and support from the Green Party, at its second reading) the Bill will become legislation. This is unlikely to happen until later this year.
If the Bill becomes legislation it will have a significant impact on current labour hire arrangements. If you regularly engage a temporary work force, or your employees are regularly contracted out to other entities, you will need to be alive to the provisions in the Bill, and any enhanced obligations that you may assume.
We will be sure to keep you updated on the progress of the Bill and general developments in this area. In the meantime, please feel free to contact our Employment Law Team to discuss this or any other matter.