Solicitor Scott Anderson, and Shan Wilson, partner, of Simpson Grierson's Employment Law Group, answer questions on triangular employment and the Employment Relations Bill.
KEY POINTS:
Q. What is a triangular employment relationship?
A. These are usually situations where an employee is employed by one party (the employer) to work under the control or direction of a third party to the employment relationship. These arrangements are a modern commercial reality in industries from cleaning to advertising.
Q. How does the law apply to employers in these sorts of arrangements?
A. Although the Employment Relations (Triangular Employment) Amendment Bill is the first attempt to address some of the issues arising out of these arrangements, the courts have had opportunities to consider these issues. In the past, difficulties have arisen when the third party tells the employer it no longer wants its work done by an employee of the employer. Where this has happened, the courts have recognised the difficult position the employer is in. However, the courts have stated employers are still bound to follow a fair process and to consult the affected employee on alternative work prospects. The employer may face difficulties in making the employee redundant because often someone else will have to be engaged to fill the employee's role after the employee leaves. As the law stands, the third party has no employment relationship with the employee and does not owe duties of good faith to the employee. The third party may exercise any right under a commercial contract with the employer to have the employee removed from performing duties. However, there is a risk that, should the employee challenge any dismissal, the employee may also bring a claim for a penalty against the third party for aiding or abetting a breach of the employee's employment agreement with the employer.
Q. What does the bill say and when is it likely to become law?
A. The Bill has two main features. The first is to provide employees working under the control and direction of a third party with the same pay and benefits as a collective agreement covering the actual employees of the third party who perform the same or similar work. The second feature is to allow the employees to add third parties to a personal grievance claim. The third party will be joined to the case if their actions have resulted in, or contributed to, the grounds of a personal grievance and it is "just to do so". The actions of this third party will be deemed to be the actions of the employer. The third party could be jointly liable with the employer for any remedies awarded. The bill is unlikely to become law in its present form. It has far-reaching implications, the most concerning being it erodes what lawyers call the "privity of contract" doctrine, which holds that third parties cannot have rights or obligations under someone else's contract. The bill does this in two ways: first, by allowing employees who are not parties to a collective agreement to enjoy the pay and benefits of that agreement, and secondly by making a third party to an employment agreement potentially liable for its actual breach.
Q. How can employers and third parties protect their interests at the moment?
A. Employers need to consider the pitfalls of triangular employment relationships when entering into them. Employers should consider including a contractual provision making the employment subject to the third party's approval. This by itself will not protect an employer from personal grievance proceedings. For fuller protection, an employer faced with third-party disapproval should make a reasonable effort to change the third party's mind, consult the employee and consider what other work could be made available. As long as the third party does not directly request that the employer takes a course of action with the employee that may breach the employment agreement, the third party is unlikely to be liable for a penalty under the ERA for aiding or abetting a breach of that agreement.
