Hidden employment risks when using a temping agency

THE DOMINION POST - TUESDAY, 26 OCTOBER 2010

Malcolm McDonald accepted an assignment from Allied Workforce Ltd (Allied) to work for Ontrack Infrastructure in a gang of 11 people. He was to help repair the railway line between Picton and Invercargill. Nine members of the gang were permanent employees. Mr McDonald and another member had come from Allied. Mr McDonald's placement was terminated some eight months after it began. His case has now gone to the Employment Court because he is challenging the "triangular employment relationship" he found himself in.

Mr McDonald entered into an individual casual employment agreement with Allied, a labour hire company. After his work repairing the railroad ended he went back to Allied and accepted further assignments.

Ontrack had a deal with Allied for the provision of labour from time to time. The agreement provided that Allied was the supplier and Ontrack the hirer. The supplier agreement said that the temporary worker supplied to carry out work for Ontrack "shall at all times be an employee of the supplier and not of the hirer".

Mr McDonald claims that Ontrack was really his employer and is seeking remedies against it.

To the observer, Mr McDonald would seem to be right. For practical purposes he was one of a gang of 11 doing the same work, receiving the same training and getting the same in-house booklet created by Ontrack for management and staff. He was told of his termination by the leader of his gang at Ontrack.

However, to someone who reads the legal documents, the picture is totally different. Mr McDonald was employed by Allied, which from time to time supplied labour to Ontrack.

Readers will be familiar with the provision of temporary workers, particularly in the administrative and clerical area, where somebody is, say, sick, and a temping agency provides a word- processor operator until the absent worker returns.

A premium is paid on the hourly rate for these services. They fulfil a real need and no one would argue that the temp was employed by the organisation needing urgent help.

However, when someone works in a railway gang for eight months with 10 other people, almost all of whom are employed by Ontrack, the perception is totally different. Here the workers feel as though they are part of the work gang, and that their employer is not the temping agency but the same institution that employs the other workers. No doubt the employee feels that Ontrack is getting the benefit of his services, as it is with the other workers', but is avoiding its responsibilities.

Mr McDonald lost his case in the Employment Relations Authority but had a partial victory in a very recent decision of the Employment Court.

He accepted that when he began working for Ontrack he was employed by Allied. However, he argued, at some point after commencing work, an employment agreement between himself and Ontrack came into existence.

The Employment Court, in an attempt to address the common sense of his claim, said that an implied contract can come into existence in a situation such as this. Accordingly, Mr McDonald's argument that he was an employee of Ontrack was tenable but, as the court said, a further hearing was needed on the detailed evidence before a decision could be given to finally determine the matter. Unfortunately the hearing before the Employment Court was on papers that had been filed and the detailed evidence the court needed to reach a decision was not before it.

Mr McDonald has a difficult battle ahead of him. The two legal contracts would lead to the conclusion that he was an employee of the labour hire company alone. However, what is written in the contracts is not the final word of whether or not a person is an employee. The real nature of the relationship between Mr McDonald and Ontrack has to be looked at.

But the court will have to be satisfied that at some point the basic elements needed for any contract were in existence.

The decision is a very important one for temping agencies and those who use them. It suggests there are hidden risks involved. A purchaser of a temping agency service may be at risk of being held to be the employer. This case will be followed closely by all temping agencies and their clients.

It is hard to escape the conclusion that the road ahead is a long and costly one for all involved. One suspects there is a lot more litigation to come for Mr McDonald, Ontrack and Allied.