Legal update: Triangular Employment Amendment Act

On 27 June 2020, the Employment Relations (Triangular Employment) Amendment Act came into force.

The Act amended the Employment Relations Act 2000, giving workers in triangular employment situations the right to raise personal grievance claims against the employer and/or the business where they are working.

Employers can also apply to have third parties included in the grievance resolution process.

What is triangular employment?

Triangular employment is where someone is employed by one employer, but working at another business or organisation (the ‘controlling third party’) that directs or controls their day-to-day work.

Common examples are people working for temp agencies, recruitment or labour-hire firms, or employees on secondment from their employer to another organisation.

New law

The change to the Employment Relations Act allows either the employee or the employer to apply to the Employment Relations Authority (ERA) to add a third party to a personal grievance claim - e.g. for discrimination, harassment or unfair dismissal - and for remedies to be apportioned to the responsible parties.

Previously, the ability of people in triangular employment relationships to raise personal grievances was limited to the person or organisation actually employing them, and employers couldn't apply to the ERA to have the controlling third party join claim proceedings.

The parliament website states: “The purpose of this bill is to ensure that employees employed by one employer but working under the control and direction of another business or organisation... are not subject to a detriment in their right to allege a personal grievance.”

Employees that believe the actions of a controlling third party caused or contributed to a personal grievance have 90 days to notify the third party from the date the action occurred or came to the employee’s notice (whichever is later).

Employers have 90 days to notify the third party from the date the employee raised the personal grievance with them.

How it works in practice

The Act recognises that triangular employment arrangements are increasingly common and provides more solid protections to the growing number of people that work in them.

For employers that regularly use recruitment agencies or take on employees on secondment, you need to be aware of your increased obligations and accountability under the Act.

The Act is designed to alleviate problems with long-term temping or labour-hire situations that eroded employment rights via arms-length contracts with agencies. But it has wide implications, as short-term temps may also take a grievance against their employer or controlling third party.

Being a responsible employer and engaging in sound employment practices, even if you are a third party, is always the best approach.

Tips to help protect your business

If your organisation engages third party agencies and temporary workers, there are some simple things you can do to protect yourself:

1. Avoid long-term temporary employment relationships.
   Even the term “long-term temporary” is a misnomer; temporary is temporary.
   Temporary workers, hired via labour-hire agencies, can be extremely useful to help with seasonal peaks, short-term leave cover, or project work. But by definition a temp worker is temporary. If you are likely to need the labour for more than 6 months, then you should probably consider hiring the workers and putting them on your payroll.

2. Treat all your people the same.
   
Just because somebody is a temp and hired via an agency doesn’t mean they’re a second-class citizen. For the short time they are with you, they are performing a valuable function (if they weren’t, why would you have them?), so treat them as part of your team.
   This will help you avoid claims of disadvantage or discrimination, and build a better company culture. Often good temps become permanent employees.

3. Be really clear on the nature of the work requirement with both the temp workers and the temp agency - this avoids confusion and ambiguity that could result in claims.
   A clearly-defined role with a clear timeframe will help avoid any disagreement about whether the temp has a claim for ongoing employment. Even if you can’t provide a specific end date, try to provide a date range.