In a welcome milestone amendment to the law, employees will now be able to join a “controlling third party” to a personal grievance with their employer. But what does this mean?
Your employer may not be who you think…
Sometimes, the party who signs an employment is not the same party that has day-to-day control over the employee. Consider the following examples of “triangular employment:”
- Employees employed within company groups may be surprised to find that their employment agreement is signed by a different company from the one whose uniform they wear. These employer companies may have limited assets, leaving employees exposed.
- A labour-hire company supplies workers to businesses. These businesses then have control over workers without having an employment relationship, or employment rights.
If you have an employment agreement with Company X, who lawfully orders you to do work for Company Y, who do you raise a grievance against when your rights are infringed? This is not always a simple question to answer. Prasad v LSG Sky Chefs NZ Ltd found that employment relationships lie on a spectrum and inquiries into the real nature of a relationship are “intensely factual.”
While the Courts’ focus on the “real nature of the relationship” allowed the plaintiffs in Prasad to be considered employees of the defendant, the Courts have not gone so far as to challenge the “unitary concept of employer” and find that one employee may have multiple employers. This causes uncertainty as to the identity of the employer and creates a barrier to dispute resolution due to potential inflated costs in litigation.
What is the significance of the new Act?
The new act introduces the notion of a “controlling third party,” defined as:
A person who has a contract or other arrangement with an employer under which an employee of the employer performs work for the benefit of the person AND
Who exercises, or is entitled to exercise, control or direction over the employee that is similar or substantially similar to the control or direction than an employer exercises, or is entitled to exercise, in relation to the employee.
An employee (or employer) can now apply to the Authority to join a controlling third party to a personal grievance if there is an arguable case that that controlling third party caused or contributed to the personal grievance.
The controlling third party, who benefits from a triangular employment relationship, now discretely incurs risks and obligations that go with those benefits, disincentivizing it from breaching its obligations to employees.
This amendment will likely benefit vulnerable workers who may not be aware of employment relationships which are prejudicial to them. If the facts of Prasad were to arise today, there would be no need to agonize over the party to raise a personal grievance against. The only question for the Court would be to determine who is responsible for the actions that led to the grievance.
Other important information:
- Controlling third parties must be notified within the 90 day statutory timeframe.
- The controlling third party is not automatically subject to the grievance upon notification- either the employer or the employee must apply to the Authority to join the controlling third party to the proceedings. This may limit the ability to engage controlling third parties in pre-litigation discussions and mediation.
- The Authority has the ability to join a controlling third party of its own motion at any stage of the proceedings.
If you are unsure about your rights, do not hesitate to contact Buckettlaw.