A ‘triangular employment relationship’ usually means a situation where one company employs workers then contracts with another company (‘the end user’) to supply those employees to the end user. As there is no contractual relationship between the employee and the end user, the employee cannot pursue the end user for a personal grievance. The only way to do so would be for the employee to argue that the ‘real nature of the relationship’ between the employee and the end user is one of employment. This is often difficult to do.

The Employment Relations (Triangular Employment) Amendment Act 2018 was recently passed into law and will come in to force 27 June 2020. This Act allows employees in a triangular employment relationship to join the end user (referenced to in the act as the ‘controlling third party’) to their personal grievance claim against their employer.  The aim of this Act is to ensure that employees in these situations are granted the protections and rights extended to those that are in a traditional employee/employer relationship.

The definition of a ‘controlling third party’ will be inserted in the Employment Relations Act 2000 and means a person who:

  • 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
  • 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 employer and an employee may now apply to the Employment Relations Authority or the Employment Court to join a controlling third party to personal grievance proceedings. There are specific steps that need to be taken before this can occur. These include that:

  • an employee must raise a personal grievance with their employer relating to an action that allegedly occurred whilst the employee was working under the control or direction of a controlling third party;
  • the controlling third party has been notified within 90 days of the personal grievance being raised (this notice period may vary depending on which party is requesting to join the controlling third party); and
  • there is an arguable case that the controlling third party’s actions caused or contributed to the grievance.

Once a claim is lodged, the Authority or Court has the discretion to grant an application that a controlling third party be joined to the grievance. It is then up to the Authority or Court to decide how to apportion liability between the parties. The Act appears to be directed at classic triangular relationships involving a labour hire organisation, its employee who is contracted to work for an end user. However, it may also capture secondment arrangements.

This Act is likely to have a significant impact on the parties to a triangular employment relationship and presents a level of complexity and uncertainty for these commercial relations.

Disclaimer: The above information is for information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on the information given.