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Articles • 2019-08-29

Triangular Employment Relationships

Triangular Employment Relationships

Agencies who provide labour to Clients, and Clients who hire labour from Agencies, should understand important changes to employment law that may have consequences for them. The Employment Relations (Triangular Employment) Amendment Bill has been passed into law and becomes effective on 27 June 2020.

It’s common for an Agency to engage workers as employees or contractors and to, in effect, hire the workers out to Clients who need workers. The Agency contracts with the Client to provide workers for a set fee (which might be hourly or a lump sum). The Client pays the Agency and the Agency pays the workers.

The main effect of the changes for Agencies and Clients is that if an employee of the Agency raises a personal grievance against the Agency when the Employee has been on an assignment with a Client, either the employee or the Agency can join the Client as a party and the Client may have liability if it has caused or contributed to the grievance.

The Client would only have liability where it exercises or is entitled to exercise control or direction over the employee in the same way that the employer (Agency) would. Where that occurs, the Client is regarded as a controlling third party.

From the Agency’s point of view, it would be prudent to include a term in its contract with the Client whereby the Client agrees to indemnify the Agency against any liability that the Agency incurs as a result of the Client’s actions.

In some respects, it would be prudent for the Client to treat workers provided through the Agency as though they were the Client’s workers. Examples would include avoiding bullying, harassment, and unlawful discrimination.

Redundancy could also be an issue for the Client to the extent that it wants to terminate any contract with the Agency because the worker is no longer required (before the end of any period agreed with the Agency) and where that may result in termination of the worker’s employment with the Agency. In that case, even though the worker isn’t the Client’s employee, it would be prudent for the Client to consult with the worker in a timely fashion to advise why their services aren’t required.

There may be some nuances in relation to issues like this that will need to be considered.

* This is not legal advice - if you need legal advise on any employment law issue or any other business/commercial law issue, please contact your legal professional.

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