New protections for employees in triangular employment relationships

The Employment Relations (Triangular Employment) Amendment Bill passed into law last week, and will come into force in 12 months’ time (unless a date is appointed by Order in Council in the meantime).

The Bill enables employees employed by one employer, but working under the control and direction of another business or organisation to join the other business or organisation to a personal grievance claim.  Employees in this category will include those engaged through labour-hire companies and “temp” agencies.

The Employment Relations Act 2000 will be amended to introduce the concept of a “controlling third party”, being a person or organisation who:

  1. has a contract or other arrangement with an employer under which an employee of the employer performs work for the benefit of the person or organisation; and
  2. exercises, or is entitled to exercise, control or direction over the employee that is similar or substantially similar to the control or direction that an employer exercises, or is entitled to exercise, in relation to the employee.

Both an employee and employer may now apply to the Employment Relations Authority or the Employment Court to join a controlling third party to a personal grievance proceeding.   An application must be granted by the Authority or Court where it is satisfied that:

  1. the controlling third party has been notified within 90 days of the personal grievance being raised (noting that the start date of the notice period may vary depending on whether it is the employee or employer requesting to join the controlling third party); and
  2. there is an arguable case that the controlling third party’s actions caused or contributed to the personal grievance.

The Authority or Court also retains a discretion to order that a controlling third party is joined to a personal grievance proceeding, at any stage of a proceeding, even if this is not requested by the employer or employee.

Where a controlling third party is to be joined to a proceeding, the Authority or Court must then consider whether to direct the employer, employee, and controlling third party to use mediation to resolve the personal grievance.  This will create some unique challenges and unfamiliar dynamics in the alternative dispute resolution space.

The Authority or Court may also require a controlling third party to contribute to any remedies awarded to an employee to the extent that the controlling third party has caused or contributed to the situation giving rise to the employee’s personal grievance.  This includes reimbursement for lost wages and the payment of any compensation for hurt and humiliation and/or the loss of any benefit.

While these amendments will only affect controlling third parties and those employers that engage controlling third parties, they introduce a range of novel issues that could impact, and in some cases strain, the commercial relationships between employers and labour-hire and temp agencies.

If you would like any further information regarding the above, please contact one of our experts.

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