Bad bosses can't hide behind labour hire

17 July 2019

Many workers may not be aware that they are currently employed within a triangle. If they are, what on earth does that mean?

In simple terms "triangular employment" refers to an employment relationship that operates in a triangle - that is the employee, their legal employer and the person who actually controls their work.

It has meant that you cannot seek remedies from your apparent employer because of legal structures, at least not without great difficulty.

Legislation just passed by Parliament deals with this issue. A wide range of workers are affected, including those working for labour hire companies and secondees.

Let's say the 'Bold Construction Company' is building a large edifice in Lambton Quay, Wellington. Because of sickness and the ebb and flow of arriving construction materials, at some times the company needs a lot more labour than other times.

So Bold Construction goes to the 'Ever-Ready Friendly Hire Company' which employs a pool of casual labourers, and get Ever-Ready's labourers to work on its building project.

All the instructions will be given by Bold Construction and if it asks Ever-Ready to remove people because it does not want them, or otherwise treats them badly, then the workers only have an obvious remedy against Ever-Ready (if at all).

Bold Construction is conveniently protected from any employment claims from the workers because it is not the employer.

Is that fair? Remember that the use of a labour hire company can be and often is genuine, but on occasions it can be a device to avoid legal responsibility for people who would normally be your own employees.

The courts have addressed some cases, as the case of Kamlesh Prasad and Liutofaga Tulai and LSG Sky Chefs shows.

Prasad and Tulai were contracted by a labour hire firm to provide work for LSG. The court noted that both workers were vulnerable, having very little appreciation of New Zealand employment law or the documentation they were asked to sign by the labour hire company.

They were both paid around the minimum wage.

After some time, LSG became concerned by the length of time it had employed some of the placements. A list of the longest serving workers was prepared and an instruction given that those at the top of the list "would have to go".

Tulai was towards the top of that list.

Following involvement of the Labour Inspector, Prasad and Tulai went to the Employment Court to seek a declaration that they were in fact employees of LSG. The court held that they were. A range of factors were considered in reaching this decision, including the amount of control LSG had, the lack of documentation and the length of service, and also the fact that LSG treated these two workers the same as it treated its own employees.

However, the court was careful to say that such a conclusion may often not be reached and this was limited to the circumstances that existed.

So it will often be the case that workers only have redress against the hire company, and the hire company may not be a company of any great substance.

Obtaining remedies from the hire company may prove difficult.

Furthermore, frequently labour hire agreements are done so the organisation hiring the worker from the agency has complete discretion for when and how long they engage the worker. Should any issue arise, the hiring organisation can simply request an alternative worker.

The unfortunate employee can only bring a claim against their agency, but the prospects of that claim succeeding are slim given that it was not the agency's decision.

Other groups of workers, besides those employed by labour hire companies, are also affected. Recruitment companies often contract in workers while they search for a permanent replacement.

Additionally, many Government employees are seconded from their normal place of employment to another agency. For example, someone employed by the fictional "Ministry of Rubber Stamps" can be seconded to the "Ministry of Bureaucracy". Their employer remains the Ministry of Rubber Stamps.

That employee may find the Ministry of Bureaucracy is treating them unfairly and they may have a complaint of bullying. But the Ministry of Bureaucracy is not the employer, so they will struggle to have their grievance dealt with in a way that involves the real villain in the piece.

The Triangular Employment Amendment Act may address these situations. It provides some protection for people in triangular employment, or if you like, employed by a labour hire company or in a secondment situation.

The act means that the company requiring labour, the "controlling third party", can have a grievance taken against it directly.

That is a huge benefit for workers treated badly. It's hard to see what remedy you could get against your labour hire company if the villain in the piece is not the subject of a grievance.

However, the act requires that the employer of that person must consider that the controlling third party has caused or contributed to the personal grievance.

This may prove problematic where the employer is determined to stay on good terms with the controlling third party. In such a case the employee would need to apply to the authority to have the third controlling party joined to the personal grievance.

In any event, it seems a good step forward to enable people who are employed either through a labour hire company or who are seconded to other work.

They may now have a remedy against the person that for all practical purposes is their employer, although legally and technically is not. This piece of legislation should be welcomed by all.