NZ News: The Triangular Employment Relations Bill

The Triangular Employment Relations Bill provides New Zealand labour-hire, contract and temp workers with greater protections under the recently passed Amendment Bill.

Triangular employment relationships are increasingly common in today’s labour market. These relationships come about when an employee is employed by a labour-hire, recruitment firm or temp agency, but the employee works under the control or direction of a third party. The relationship may be short-term, such as that undertaken by temp labour, or it can also be a long-term relationship.

It looks something like this:


The Triangular Employment Relations Bill


A triangular employment relationship typically involves one company – Company B in our example – employing workers and then contracting those workers to another company – Company A in our example – that is, the ‘host’ organisation, and supplies those workers to them on a temporary basis.

Usually, there’s little or no documentation or established contractual relationship, between the workers and Company A, the host organisation. So the risk for the workers was typically high.

It’s now deemed that the employees in this scenario, which include those engaged through labour-hire firms and temp agencies, are able to make personal grievance claims to Company A.

This newly amended Triangular Employment Relations Bill, introduces the concept of a ‘controlling third party’, a concept that replaces the Bill’s original use of ‘secondary employer’ terminology, to make clear that the third party does not need to technically employ the worker (i.e. Company A in our example) – which is what the term ‘secondary employer’ had originally suggested. Instead, the Bill defines the ‘controlling third party’ as a person or an organisation that is deemed to:

  1. be in a contract or similar arrangement with an employer (Company B in our example). In this scenario, the employee of the employer performs work for the benefit of the person or organisation; and
  2. exercises, or is entitled to exercise, control or direction over the employee that is similar or substantially similar to the control or direction that an employer exercises, or is entitled to exercise, in relation to the employee.

What’s the point of all this, you ask?

Well… until this change, a worker in this situation couldn’t make a personal grievance claim against Company A, the host company i.e. the place where they’re working on a daily basis. They could, however, file an application with the Employment Relations Authority or the Employment Court, so that the ‘real nature of the relationship’ could be determined between themselves and Company A, the host. Typically, in doing this, the worker would seek a declaration that they are in fact, an employee of Company A. And only then could the worker make a personal grievance claim against Company A.

It’s a long and complex process – and one that is often too arduous and costly for the worker.

Now, the Triangular Employment Relations Bill allows for a broader definition of ‘personal grievance’. So Company A, in our example, can have a claim made against it by the employee or even the employer, Company B (in our example). So, if it’s determined that the employee has a grievance, then the Employment Relations Authority or the Employment Court may order Company A to reimburse the employee for lost wages as a result of the grievance or compensate them under the Act. They may also award any remedies against Company A and against Company B, in a way that reflects the extent to which the actions of each contributed to the situation, where the employee became aggrieved.

One of the reasons that Company A, the ‘host’ organisation might choose to use workers employed by someone else, is to protect itself from personal grievances. This Bill would mean that the host organisation no longer has that protection. It’s a win for the worker.

According to MinterEllisonRuddWatts, in respect of the changes to the Triangular Employment Relations Bill ….

“While these amendments will only affect controlling third parties and those employers that engage controlling third parties, they introduce a range of novel issues that could impact, and in some cases strain, the commercial relationships between employers and labour-hire and temp agencies”.

Akin to the changes to labour hire laws in Australia, the Bill will have a significant impact on labour-hire companies, and the organisations that engage them for the supply of workers. And as such, all parties to the relationship need to be across these changes.

Are you in NZ?

What’s your experience with the Triangular Employment Relations Bill?

I’d be keen to hear from you, so feel free to reach out to me here.