The Labour-led Government has recently brought in a number of changes to employment law.
In December last year and May this year there were amendments to the Employment Relations Act.
In April this year the Domestic Violence Victims' Protection Act introduced domestic violence leave and short-term flexible working arrangements for persons experiencing domestic violence.
The latest changes are signalled by the Employment Relations (Triangular Employment) Amendment Act 2019, which is scheduled to be enacted sometime before June 27 next year.
This legislation allows an employer on the receiving end of a personal grievance to join other businesses which exercise control over the employee. The control or direction needs to be similar, or substantially similar, to the control or direction that the employer exercises.
The Amendment Act will also allow an employee to notify a grievance against a business other than their employer, again where that business exercises control or direction over that employee.
The ability to join a controlling third-party business is triggered by a personal grievance being raised and by an application to the Employment Relations Authority (ERA) to resolve that grievance.
The grievance needs to relate to something that occurred while the employee was working under the control or direction of the controlling third-party business.
The ERA must grant an employee's application if the employee has notified a grievance against the controlling third-party business within 90 days of the action alleged to amount to a personal grievance and the ERA finds that there is an arguable case that the third-party business is indeed a controlling third-party business and its actions have caused or contributed to the personal grievance. The ERA can also, of its own motion, join a controlling third party to proceedings.
If the employer wants to join a controlling third-party business, it needs to notify that business within 90 days of the employee raising the grievance with it.
The remedies available to the ERA include reimbursement of lost wages and compensation for humiliation, loss of dignity and injury to feelings, and loss of any benefit (whether or not of a monetary kind).
The ERA will need to decide the extent to which the controlling third-party business caused, or contributed to, the situation. The ERA can then award remedies in "a way that reflects the extent to which the actions of each contributed to the situation that gave rise to the personal grievance".
What this means it that both the employer and the controlling third-party business will need to put their cases and the ERA will decide the extent to which either or both of them contributed to the situation that gave rise to the personal grievance.
Not only does an employee need to notify a personal grievance, but the ERA, after receiving an application, must order the controlling third party to be joined. That means controlling third-party businesses will need to make an assessment of the likelihood of being joined by the ERA before responding to the grievance.
An employer on the receiving end of a grievance will often agree, voluntarily, to attend mediation. A controlling third-party business might also want to join mediation before becoming embroiled in ERA proceedings. On the other hand, if they want to "chance their arm", they can argue that they don't exercise sufficient control or direction over the employee.
If they are unsuccessful then the ERA must consider whether to direct the employer, the employee and the controlling third-party to use mediation services. At the end of the day, the controlling third-party business may end up in mediation in any event.
One of the most difficult issues for assessment will be whether or not the control or direction is similar or substantially similar to the control or direction the employer exercises. "Substantially similar" is not defined in the Amendment Act.
The classic situation this legislation will apply to is employees employed by recruitment agencies but outplaced to other businesses. Businesses seconding their employees to other businesses will also be caught. The legislation is clearly intended to remedy situations where an employee is working in a business that is not legally its employer and doesn't have employment obligations to that employee at present.
Businesses with such employees working within them will need to carefully consider how they treat those employees because if they are found to be a controlling third-party business, their actions are likely to be scrutinised against the standard applied to the actual employer.
Most businesses, whether employers or controlling third-parties, treat the people working for them fairly, regardless of their legal status. However, moving forward, the arrangements between employer and controlling third-party businesses are likely to focus on their respective responsibilities and the risk associated with employees working in their business.
The delay in the Employment Relations Amendment Act taking effect is to allow businesses in these situations to nut out some of that crucial detail.
- The opinions expressed in this article are those of the writer and do not purport to be specific legal or professional advice. John Farrow is a litigation partner with Dunedin law firm Anderson Lloyd.
