Employment Relations – (Triangular Employment) Amendment Act 2019
Employees in triangular employment relationships are afforded new protections under new employment legislation.
On 27 June 2019, 11 years after the bill was first introduced to Parliament, the Employment Relations (Triangular Employment) Amendment Act (the Act) received Royal Assent. The Act amends the Employment Relations Act 2000 and comes into force on 27 June 2020, or earlier if a date is appointed by the Governor General.
Background to the bill
The Act aims to provide more robust protection to employees in triangular employment relationships. It reflects New Zealand’s changing employment environment, which has experienced a growing number of employees entering into triangular arrangements. A triangular employment arrangement typically arises where an employee is employed by one company or organisation, such as a hire or recruitment company, but works under the control or direction of a third party (Triangular Employees). Currently Triangular Employees cannot easily claim a personal grievance against the controlling third party, which can result in unfair employment practices and the deprivation of certain employment rights. While an application can be made to the Employment Relations Authority for a determination that an employment relationship exists between the employee and the controlling third party, this can be a complex process. The Act’s amendments simplify the personal grievance process and increase access to justice for Triangular Employees.
Amendments to the Employment Relations Act 2000
There are two key changes that the Act introduces to the Employment Relations Act 2000: the definition of a controlling third party, and expanding the definition of a personal grievance to allow Triangular Employee’s to join controlling third parties to a personal grievance claim.
Definition of controlling third party
The Act introduces the definition and interpretation of a controlling third party, being a person who:
- has a contract or other arrangement with an employer where one of its employees performs work for the benefit of that person; and
- exercises, or is entitled to exercise, control over the employee in a way that resembles the control that the employer has over the employee.
The definition clarifies who is captured under the Act as a controlling third party and indicates that Parliament will no longer allow controlling third parties to avoid liability by hiding behind the employee’s primary employer.
The most significant change introduced by the Act is the framework under which Triangular Employees can raise a personal grievance against the controlling third party. The Triangular Employee must first raise a personal grievance against its primary employer in accordance with current employment legislation requirements. The Triangular Employee, or the primary employer, can then apply to the Authority or the court to join the controlling third party to the grievance claim. An application will be granted where two requirements can be satisfied:
- the controlling third party has been accurately notified of the personal grievance claim; and
- an argument is made out that the third party is a controlling third party, as defined by the Act, and its actions have caused or contributed to the personal grievance.
Interestingly, the Act gives the Authority or Court the discretion to join a controlling third party to a personal grievance claim at any stage of a proceeding, without any application. If the Triangular Employee is successful in its personal grievance, remedies may be awarded against the controlling third party and the employer. Remedies will be apportioned between the employer and the controlling third party to the extent that each party’s actions contributed to the grievance, and may include reimbursement for lost wages, and/or compensation under s 123 of the Employment Relations Act 2000.
Implications for employers
The Act represents an increase of liability for those employers who regularly enter into labour hire arrangements with recruitment agencies, or take on employees on secondment. While employers are always encouraged to engage in sound employment practices, employers should be aware of their enhanced obligations under the Act and the resulting increased accountability.
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The above article was included in the most recent edition of our quarterly newsletter Employment News. For this and other articles, please click on the following link: Employment News – Edition 5