Triangular Employment Relationships Explained

A triangular employment arrangement is a situation where the employer (the agency) arranges for the employee’s placement or assignment with a third party (controlling third party a.k.a. the host organisation).

It is ‘triangular’ because there are three parties to an employment arrangement, with each party having distinct relationships with one another.

Common situations where triangular employment happens include where an employee is employed by a recruitment or employment agency, and is sent on work assignments to another organisation. Sometimes this is called labour-for-hire or “temping”. Other situations include where an employee is on a secondment from their employer to a host organisation.

Changes to employment law in the past month mean a worker in these situations can now claim a personal grievance against a host organisation.

A worker must raise a personal grievance in the usual way with their employer and then either the employee or the employer may make an application to the Employment Relations Authority or the Employment Court for the host organisation to be joined to the grievance proceedings. It is neither the worker nor their employer who make the decision if the host organisation is joined to the grievance proceedings.

We think while it might help the employer avoid liability for any personal grievance by applying for the host organisation to join the grievance, it might also create commercial friction between the employer and the host organisation.

What are the practical implications for employers?

We expect potential redundancy situations to cause the most problems. For instance, where the host organisation decides that they no longer have work for the employee, will it be lawful to simply direct their employer to take them back?

We think it will but recommend that the host organisation first enquire with the employer what this will mean for the employee’s ongoing employment. If their employment will be terminated as a result, consider taking the additional step of consulting with the employee.  Ultimately, for the host organisation to be liable, it must have acted unjustifiably.  Therefore, it should act fairly towards the employee and in accordance with the terms of the contract it has with their employer.

We also recommend the employer keeps checking in with their workers working under the control of another organisation and not “set them free”. Having procedures for employees to report concerns back to their employer will be essential.

It’s worth noting that this new law doesn’t stop employees from arguing that they’re really employees of someone else, like in Prasad & Tulai v LSG Sky Chefs New Zealand Ltd. There, labour hire workers were in fact employed by the flight catering company where they worked, even though they had contracts saying they were employees of another entity.

Undoubtedly, the Act will have far reaching implications for employers who use third party labour, whether on a temporary or long-term basis. If your organisation uses temp-hire workers or seconds workers from other organisations, we recommend you check your employment disputes insurance to see if you would be covered in the event you are joined as the host organisation to a grievance proceeding and to check what is covered in the service level agreement you have with the organisation providing you with workers.