Labour- hire arrangements: what you need to know

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It’s time to dust off the cobwebs and introduce New Zealand to the Employment Relations (Triangular Employment) Amendment Bill…. again.

Commonly referred to as labour-hire arrangements, triangular employment relationships occur where an employee has a direct employment relationship with one entity (the primary employer), but actually works for another entity (the secondary employer).

These relationships play an important role in New Zealand’s economy - particularly in the construction and manufacturing industry, where employees are often required on short notice and/or for specified periods of time.

Sadly, reports of exploitation and discrimination in triangular relationships are rife – especially amongst migrant workers. This is because, currently, workers have no rights in their contracts to take action against the secondary employer entity if they are treated unfairly.

The need to address the issue of employees being exploited in these relationships was first recognised by former Labour MP Darien Fenton, who drafted the Bill to grapple with the issue back in 2007.

However, Labour’s plans to push the Bill through Parliament were cut short following the Party’s loss in the 2008 election. Fast forward ten years and the Bill is back on track after it was introduced by Labour MP Kieran McAnulty earlier this year.

The Bill proposes two significant changes to the Employment Relations Act 2000.

First, an employee in a triangular employment relationship can be bound by a collective agreement that the secondary employer is party to, if:

· that agreement covers the work being carried out by the employee; and

· the employee is a member of the union party to that agreement; and

· the employee is not bound by any other collective agreement with the primary employer.

Second, it provides a mechanism for an employee to raise a personal grievance against a secondary employer, if:

· the secondary employer has contributed to the grievance; and
· It is just to do so.

In its current form, the Bill leaves a lot of questions unanswered. For example, how will this affect the 90 day timeframe to raise a grievance? Will secondment arrangements be captured? How will 90 day trial periods be affected? How will the Courts apportion liability between the primary and secondary employer?

What is clear that is that the Bill is likely to have weighty implications for both labour hire agencies and employers currently engaging workers through triangular employment relationships, who will both inherit increased risks and liabilities in respect of their temporary resourcing arrangements.

The Bill passed its first reading on 21 March 2018. Public submissions on the Bill closed in May and the Select Committee report is due late September 2018.

By Mallory Ward, Associate and Greg Cain, Partner in the Employment team at Kensington Swan.

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