You may have heard the phrase “Triangular Employment Relationship” thrown around before. This phrase does sound complicated but refers to an employment relationship, frequent in industries that require temporary workers through labour hire businesses.

This relationship works by an Employer employing Employees who are contracted out to a controlling third party on a temporary basis. There is often a lack of contractual documentation between the Employees and the controlling third party.

The law use to state that a worker in this relationship could not claim a personal grievance against the controlling third party but could file one against their Employer. The only way an Employee could file a personal grievance was if they filed an Application with either the Employment Court or Employment Relations Authority to asses the “real nature of the relationship” between the Employee and the controlling third party. If it is found that the Employee is in fact, by law, an Employee of the controlling third party, the Employee can then claim their personal grievance.

This process has gotten a lot easier for Employees in this situation as they can now file against both their Employer and the controlling third party.

The “Employment Relations (Triangular Employment) Amendment Bill” was first introduced on the first of February 2018. It has since passed into law and is expected to come into force late 2019, early 2020 with the idea to “prevent the exploitation of migrant workers”.

This amendment replaces the original usage of “secondary Employer” with “controlling third party”. This may not seem significant, but it makes clear that the controlling third party does not have to be a technical Employer of the Employee as the previous term suggested. This new definition focuses on a person 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; 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.”

The most important part of the Bill is the expanded definition of personal grievance. Now an Employer or Employee can add a controlling third party onto a claim, and so can the Employment Relations Authority or Employment Court if and when they see the need arise. The controlling third party then shares all compensation with the Employer, no matter which way the Court/Authority rules.

Businesses are no longer protected from workers taking a ‘personal grievances’ action, when using Labour Hire services. They are equally at risk of a personal grievance – as if they employed the worker directly.

Please feel welcome to contact Lynda Mathieson at Mathieson Chartered Accountants. Lynda is more than equipped to help navigate you through the sometimes challenging changes in our New Zealand Employment Law.

Ph (03) 307 6455  Cell 027 5544747