Currently the workers are prevented from raising a personal grievance against the third party.
This way of engaging employees has been used as a way to mitigate employer obligations and the risk of personal grievances and enables an employer to simply cease engaging an individual for pretty much any reason they like. That is all going to change.
The Employment Relations (Triangular Employment) Amendment Bill was passed into law in July and will come into force in July 2020. The changes to the legislation introduce a definition of a “controlling third party”. This Bill enables employees employed by one employer, but working under the control of a third party, to join the other party to a personal grievance claim. The Employment Relations Authority (ERA) or Court can then require the third party to contribute to any remedies awarded to the employee including lost wages and compensation.
The “controlling third party” is defined as a party (person or organisation) who exercises or is entitled to exercise control or direction over the employee, and that person does work for the benefit of the third party. That definition will encompass employees from ‘temp’ agencies and could also include employees who are seconded or contracted to another organisation to carry out specialist tasks. For example a construction company may have a contract with a plumbing company to do the plumbing in the houses they build. When the plumbing company sends their employee to the construction company to work at the project site, the plumbing employee could raise a personal grievance against the plumbing company and the construction company.
The employee will still in the first instance need to raise the personal grievance with their employer. Both the employer or the employee can then apply to the ERA or Employment Court to have the “controlling third party” joined to the personal grievance. The “controlling third party” has to be notified within 90 days of the grievance being raised. As the employee has already had 90 days to raise the personal grievance in the first instance, it could be up to 180 days before the “controlling third party” become aware they have an issue.
To further complicate matters the ERA or Court can order a controlling third party to be joined to the personal grievance at any stage, whether or not the employer or employee request it. In view of the several months it is currently taking for an ERA hearing on a case, the third party may not become aware they are involved in a dispute for many, many months after the issue has arisen. In the most extreme circumstances, if a grievance is appealed and the matter is before the Employment Court, the third party conceivably may not be advised of their involvement for over a year.
The Authority and Court have an obligation to direct the parties to mediation in the first instance. Including third parties in a mediation is going to create some new challenges. We are yet to find out what will happen if the employer wishes to reach a settlement but the third party doesn’t or vice versa.
This legislation change is going to create a new set of challenges and obligations. If you have any concerns or questions about how this may affect you, please contact one of our Consultants.