Submission to the Education and Workforce Committee on the Employment Relations (Triangular Employment) Amendment Bill 2018

1        The Beneficiary Advisory Service (“BAS”)[1] strongly supports this legislation and urges the select committee to adopt it.

 

Our status as submitters

2        BAS was set up in 1992 to promote and protect the legal, social and citizenship interests of people on benefits and low incomes. Our workers, both paid and voluntary, are drawn from this group and derive a wide range of skills and opportunities through the work they do.  Our organisation also reflects the ethnic diversity of our clients, as our workers are of Māori and Pākehā/Palangi descent.

3        We are registered as a Charitable Trust under the name of the Christchurch Peoples Resource Centre.

4        Our primary service is to provide individual information, advice and advocacy for people who are experiencing problems in the benefit system. These problems range from simple entitlement questions to complex legal issues. We have dealt with many of the benefit reviews in Christchurch and we have helped to prepare cases for the Social Security Appeal Authority, the High Court and the Court of Appeal. People who are faced with social security problems are almost invariably referred to us if they contact other community agencies.

5        We have around 1000 new clients each year and deal primarily with clients from the Canterbury region (although we receive referrals from all over the country). This involves giving information and advice, direct negotiation with the Ministry of Social Development, assistance with applications, support with interviews, and representation at hearings. Our referrals come from other major agencies and a wide range of non-community sources. We are unique as a service in terms of a combination of perspective, knowledge and skills.

6        Our work frequently involves an interface with employment law. For example, our clients are variously either allowed to work part-time whilst receiving a social security benefit or expected to find work as part of their general work obligations; in some cases, our clients have been refused social security support because they have allegedly been dismissed for misconduct, or left work voluntarily, or purportedly refused “suitable” employment; in other cases, our clients have been sent to lengthy unpaid “work trials” as part of their work obligations; and so on.

7        When our clients are at work, or come off a benefit, they are more likely to move into the unstable, poorly paid, vulnerable work that has been encouraged by the incremental dismantling of employment protections over the past nine years.  The child poverty we deal with when advising on social security issues is not necessarily mitigated by work.  About 29 percent of poor children have at least one parent working full-time on a low wage.[2]  The wage/work bargain makes no allowance for child poverty.

8        One notable source of this vulnerability in work arises from exploitation of the contractual uncertainties currently arising from triangular employment relationships. At present, without a contractual nexus establishing an employment relationship, the person performing the work will not be an employee within the meaning of s 6 of the Employment Relations Act 2000 and will then be deprived of basic employment protections.

9        Dubious labour hire practices can then be deployed so as to avoid the provision of fair working arrangements for workers who are forced to rely on short term contracts through a third party. Again, such practices have been encouraged by the incremental dismantling of employment protection by successive National-led coalition governments.  In the leading New Zealand case, Liutofaga Tulai, a young mother, worked for extended periods of time for up to 63 hours a week on an amount equivalent to the minimum wage in order to sustain her family.

 

The case law

10      It is no answer that, in rare cases, the affected workers in triangular employment relationships have successfully challenged the resulting unfairness in the courts. Such cases are expensive, stressful and potentially long drawn out. In the leading case, Prasad and Tulai v LSG Sky Chefs New Zealand Ltd [2017] NZEmpC 150, the Court’s decision was delivered eight years after the second plaintiff had commenced a four-year period working under the triangular relationship, and the substantive decision was not delivered until three interlocutory applications had been disposed of.

11      They are also uncertain in outcome. For example, in McDonald v Ontrack Infrastructure Ltd [2010] NZEmpC 132; (2010) 8 NZELR 108, the Full Court observed that the key issue, also emerging from the analogous UK case law, [3] was a determination of the real nature of the working relationship, “which included examining whether there has been an intention to create legal relations and the issues of agreement and consideration” (at [45]). Here, the Court held that “it is not helpful to set out rules or even factors to be taken into account in determining whether the real nature of the relationship between a worker and the end user in a tripartite agreement is a contract of service: that in the end will turn on the facts of each case and a consideration of all relevant matters” (at [50]): and that the inquiry will be intensely factual and the result of the case determined accordingly (at [51]).

12      The broad analysis in McDonald was applied in Prasad and Tulai v LSG Sky Chefs New Zealand Ltd [2017] NZEmpC 150, above.

13      In Prasad and Tulai, each of the plaintiffs had signed documents purporting to be an independent contractor agreement with a labour hire company, Solutions Personnel Ltd (“SPL”).  Illustrating the potential for exploitation, both plaintiffs were immigrants who spoke English as a second language and were described by the Court as being in a vulnerable position: “[they] had very little appreciation of New Zealand employment law, or the documentation they were asked to sign” (at [5]).

14      SPL provided workers to LSG Sky Chefs New Zealand Ltd (“LSG”), among others. The plaintiffs were paid by SPL at sums broadly equivalent to the minimum wage. In turn, SPL was paid by LSG at a higher rate for the hours worked by the plaintiffs.

15      The plaintiffs worked extensive hours for LSG. The second plaintiff, a young woman with a child, worked for up to 62.75 hours a week as a parent trying to sustain her family. She once worked 34 continuous days without a break.

16      Being deemed to be contractors, both plaintiffs were also notionally deprived of support such as holiday pay, sick leave, parental leave, employer ACC contributions and KiwiSaver, as well as access to personal grievance protection.

17      For many workers, this is the reality of the “flexibility” and “choice” celebrated by those, such as the previous National-led governments, who favour labour market deregulation.

18      Whilst the plaintiffs had signed what purported to be an independent contractor agreement with SPL, the Court noted the reality that both plaintiffs were eager to work and simply signed whatever was put in front of them (at [56]), with no explanation from either SPL or LSG (at [55]), then being “effectively steam-rolled into signing a document which they had no real understanding of” (at [59]). They were then held to be employees of LSG.

19      Notably, the case was brought by the plaintiffs’ union, E tū. Due to the progressive dismantling of employment protections under successive National-led governments, fewer and fewer workers are able to rely on union protection in situations such as this.

20      Although the Prasad and Tulai decision has been seen by some to resolve the issue of triangular employment, given the expense, time, and stress involved in bringing legal proceedings to establish the nature of the relationship, its effect is thus precisely the opposite. Rather, it signals the need for urgent – and long overdue – reform.

 

The bill

21      We support clause 5 of the bill, providing that employees of a primary employer may in certain circumstances be bound by a collective agreement to which the secondary employer is party.  This ensures that employees employed by one employer, but working under the control and direction of another employer, are not deprived of the right to coverage of a collective agreement covering the work performed for that other business or organisation.

22      In essence, in this respect, the bill simply provides all such workers with terms to which the employer has already agreed rather than enabling those terms and conditions to be undercut by a practice of hiring purportedly “temporary” workers other than as employees through a third party. In this respect it protects not only the workers who are supplied under a triangular relationship, but also the workers who have negotiated the collective agreement which is not then undermined.

23      We support the provision in clause 6 that such a worker may join the secondary employer as a party to any personal grievance action with leave of the Employment Relations Authority or the Employment Court and the provision for joint liability.  This ensures that such employees are not subjected to a detriment in their right to raise a personal grievance.

24      Currently, the absence of a clear right to bring a personal grievance leaves many labour hire workers extremely vulnerable to unfair behaviour, ranging from harassment to summary termination of the working arrangement.  The courts have also frequently commented on the reluctance of temporary workers to raise health and safety issues for fear of not being re-engaged.  Further, as the Court pointed out in Workforce Development Ltd v Hill [2014] NZEmpC 174, existing difficulties in relation to dismissals are compounded where there is a triangular relationship and the dismissal is triggered by the refusal of the employer’s client to have an employee on site. [4]

25      We also support the necessary definitional changes in clause 4 of the bill.

 

Written submission only

26      We do not request to be heard orally on this submission.

 

 

[1] Our postal address is: Christchurch Community House, 301 Tuam Street, Christchurch. Telephone: (03) 377 3560 or (03) 379 8787. Email: bas.cprc@gmail.com. Facebook: @BeneficiaryAdvisoryService. Website http://www.bas.org.nz.

[2] Jonathon Boston and Simon Chapple, “New Deal for Kids, available at http://www.noted.co.nz/archive/listener-nz-2014/new-deal-for-kids/

[3] For an examination of the analogous Australian case law, which also featured in argument in both McDonald and in Prasad and Tulai, see Andrew Stewart, “Redefining Employment? Meeting the Challenge of Contract and Agency Labour” (2002) 15 Australian Journal of Labour Law 235. For corresponding UK commentary, cited in Prasad and Tulai, see Mark Freedland and Jeremias Prassl “Employees, Workers and the ‘Sharing Economy’: Changing Practices and Changing Concepts in the United Kingdom” (2017) 6 SLLERJ 16.

[4] In that case, it was the Department of Corrections that investigated concerns about the actions of the defendant, a tutor employed by the plaintiff, with the outcome that her access to the prison where she worked was withdrawn. This in turn triggered the termination clause in her employment agreement.