Triangular Employment – A Quick Guide for N.Z Employers
The Employment Relations (Triangular Employment) Amendment Act 2019 (‘the Act’) amended the Employment Relations Act 2000 to address a longstanding gap in New Zealand employment law for ‘triangular’ work arrangements. Triangular work is where:
An employee is employed by one entity (the ‘employer of record’), but
Works under the control or direction of another organisation (a ‘controlling third-party’), and
The third-party benefits from the employee’s work.
Before this change, employees could raise personal grievances only against their direct employer, even if the controlling third-party was the one directing their day-to-day tasks. The law change now allows for controlling third parties to be joined to personal grievance proceedings under certain conditions.
Definition of ‘Controlling Third-Party’
A controlling third-party is now defined in the Employment Relations Act 2000 as a person or organisation who:
Has a contract or arrangement with an employer under which an employee performs work for the third-party’s benefit; and
Exercises, or is entitled to exercise, control or direction over the employee that is similar or substantially similar to the control an employer would have.
This may arise in common labour-hire, secondment, outsourcing, or on-site work arrangements where the host organisation, or third-party business closely directs how the employee’s work is performed.
How a Third Party Can Be Joined to a Personal Grievance?
Under section 103B of the Act:
An employee must have raised a personal grievance about actions that took place while working under the control of the third-party.
The employee (or employer) must notify the third-party within the standard 90-day statutory timeframe for raising a claim that its actions caused or contributed to the grievance.
If there is an arguable case that the party is a controlling third-party and caused or contributed to the grievance, the Employment Relations Authority or the Employment Court may grant the application to join the party to the proceedings.
Once joined, the Authority or Court may apportion remedies between the employer of record and the controlling third-party to reflect their respective contributions to the personal grievance, e.g. for unjustified dismissal.
Controlling third parties, or host organisations are frequently unaware of the complexities associated with this area of employment law, including that they can face exposure to liability for personal grievance claims for which they are joined to under the legislation – even though there is not a direct employment relationship with the employee involved.
These situations can cause further problems, including relationship breakdowns and significant pressure in the commercial relationship between the employer of record and the host organisation. This is because each one often tends to blame the other for the claims, which creates additional challenges in terms of defending and resolving employment disputes, particularly when all three parties are separately legally represented. Employer Pro has proven experience assisting employers and host-organisations with managing triangular employment disputes under the Act and is ready to assist businesses with these sorts of claims.
These disputes are typically more complex than standard employment disputes where there are usually only two parties (the employer and the employee). They tend to take a significant amount of time to resolve as the parties often require more resource and hands-on support to understand their risk profile and work through their options for resolution.
Case Law Snapshot – What Recent Cases Tell Businesses
Mr Welten worked for McKay Limited but was placed on site at Oji Fibre Solutions’ Kinleith Mill under a services arrangement. Oji exercised day-to-day control and direction over Welten’s work and raised concerns about his performance, which led McKay to remove him from site without fair process.
The Authority found that Oji Fibre Solutions was a ‘controlling third-party’ because:
There was an arrangement under which Welten worked for Oji’s benefit.
Oji exercised control over the employee similar to that of an employer.
Oji’s dissatisfaction about performance contributed directly to the employment problem impacting Welten’s working conditions.
Consequently, Oji was appropriately joined to the personal grievance proceedings alongside McKay. While remedies and apportionment are ultimately determined by the Authority based on causation, this decision illustrates that organisations acting as hosts with significant operational control cannot assume they are insulated from liability. The parties were directed to mediation to resolve Mr Welten’s claims.
Employer Takeaway: When a third-party exercises control over how an employee performs work on site – especially in labour-hire or placement scenarios – it risks being added as a ‘controlling third-party’ in personal grievance proceedings. This can expose the third-party to orders for remedies (such as lost wages or compensation) alongside the employer of record.
Holland v Kingston Offshore Services Ltd & MMA Offshore Limited [2024] NZERA 748
Mr Holland was employed by a labour-hire company and placed to work on a vessel operated by MMA Offshore Ltd. Although not his formal employer, MMA exercised day-to-day operational control, including requiring compliance with its onboard policies. When Holland’s employment ended following the application of those policies, he raised a personal grievance and applied to join MMA as a controlling third-party.
The Authority found it was arguable that MMA exercised employer-like control and direction over Holland’s work and that its actions contributed to the employment relationship problems. The Authority therefore granted the application to join MMA to the personal grievance proceedings.
Employer Takeaway:Host organisations that impose operational requirements and directly control work – even in specialist or project-based settings – may be treated as ‘controlling third parties’ and exposed to personal grievance liability alongside the employer of record.
Why This Matters for Employers & Businesses
Expanded Liability
Under the 2019 amendments, host organisations, agencies and outsourcing firms can no longer avoid liability by virtue of not being the formal employer.
If they control or direct work, they may be liable for employment relationship problems and must be prepared to participate in grievance investigations and potentially share liability or face adverse litigation findings and outcomes against them.
Notification Obligations
Both employees and employers of record must ensure that controlling third parties are notified of grievances within the legal timeframe — typically 90 days — or applications to join them to proceedings may fail.
Apportionment of Remedies
When remedies are awarded, the Authority or Court will apportion responsibility between the employer of record and the controlling third-party. They must consider the extent to which each party’s actions caused or contributed to the personal grievance.
Practical Considerations
Labour-Hire and Outsourcing
Common triangular employment scenarios such as labour-hire placements, outsourced service arrangements, and secondments must be carefully managed so that roles, control, and responsibilities are clearly documented and understood to minimise risk. Often supervisors and management of host organisations are completely unaware of the risks associate with triangular employment and the fact they can be joined with relative ease to legal proceedings.
Control and Direction
Document who exercises control over daily work, performance management and disciplinary matters, always ensure an appropriate and formal employment process is implemented before terminating employment. The more control a third party has – particularly operational authority – the higher the risk it may be deemed a controlling third-party.
Agreement and Notification
Ensure contracts and processes incorporate mechanisms that respond to staff management and notification of workplace issues, or concerns.
Employer Takeaways
The Employment Relations (Triangular Employment) Amendment Act 2019 allows employees to join a third-party to their personal grievance where that party has exercised employer-like control over work.
A controlling third-party can be joined to proceedings if notified and an arguable case exists that its actions caused or contributed to the grievance.
Remedies can be apportioned between the employer and the controlling third-party reflecting their relative responsibility for the claim.
Employers and host organisations alike must consider contractual arrangements, supervisory practices, and documentation to manage legal risk.
Compliance Warning
Under the Employment Relations (Triangular Employment) Amendment Act 2019, organisations that are not the employer of record can still be exposed to personal grievance liability where they exercise control or direction over an employee’s work and are responsible or otherwise contribute to an employee’s claim.
Host businesses, labour-hire clients, and organisations using outsourced or on-site workers should not assume they are insulated from employment claims and should work constructively to resolve employment issues, including ensuring an appropriate and formal employment process is implemented to resolve any issues with an employee.
Where a third party’s actions cause or contribute to an employment relationship problem, that party may be joined to personal grievance proceedings and can be subject to orders for remedies, including compensation and lost wages, alongside the employer of record. Liability is determined by reference to actual control and influence in practice, and each party’s relative contribution for the claims arising, not contractual labels or commercial intent.
Employers and host organisations should regularly review labour-hire and outsourcing arrangements, clearly define roles and responsibilities, and ensure performance, conduct, and removal decisions are managed carefully and consistently with legal obligations. Failure to do so can result in shared liability and significant financial exposure.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro if in doubt on their matters involving triangular employment issues, controlling third-party liability and associated legal disputes. Employer Pro has a range of employer focused resources and services available through our competitive Employer Protection Packages.
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