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Casuals and temps: proposed changes

18 July 2008

What about flexibility for employers?

Well, one way of achieving flexibility in managing inconsistent workflows has been for employers to employ workers on a casual, "as required" basis, or to utilise agency temps or employees on "secondment".

Those options will remain but on 22 June the government announced planned law changes to secure "stronger protections" for casual and temporary workers.

It’s early days yet, but Cabinet papers give some cause for concern. While proposals for a code of practice and an education campaign for casuals and temps have merit, those calling for more powerful Labour Inspectors and statutory interference in so-called "triangular" temporary and secondment arrangements need more careful consideration.

The proposal concerning Labour Inspectors is essentially that casuals, who contend they are, legally, permanent employees, may ask a Labour Inspector to determine the issue. Clearly the government’s idea is to provide a no- or low-cost, low-level and speedy dispute resolution mechanism if the parties are unable to agree for themselves. In principle that’s a good thing.

Yet we have a practical concern: that there is already a three-step dispute resolution process available to employees (and employers) under the Employment Relations Act – mediation, Authority investigation and finally litigation in the court. There is also the possibility of appeals to both the Court of Appeal and Supreme Court.

We don’t think it’s really necessary to add Labour Inspectors to the mix. Experience tells us that existing mediation and Authority processes work well, efficiently, and cost-effectively for most matters. And mediation is most effective when the parties have not yet formed a firm view, which they will tend to do if a Labour Inspector becomes involved in the first instance. So Labour Inspectors may be polarising and thus counter-productive.

Also, the prospect of having to debate a casual’s status four times before the court finally resolves the matter (subject to appeals) is likely to be a daunting one for most employers. If there’s an issue, it’s not one of access to justice, but better education about rights.

As to temporary and seconded employees, there are two proposals:

  1.  that any collective (unionised) terms of employment in place between the employee’s union and the temporary "host" employer trump lesser individual terms, and 
  2. apportionment of liability between the employee’s temporary "host" and his or her legal employer.

Proposal (1) clearly involves potentially greater costs for those supplying temporary workers, and so there will be a need for due diligence of relevant collective agreements as part of the contracting process. The impact on employment agencies, which will likely be the subject of select committee submissions, will need to be balanced against the social need for protection. Presumably temporary employee’s terms and conditions reflect the flexibility of the arrangement – for both parties.

Apportionment of liability between an employee’s employer and his or her temporary "host" employer raises some potentially difficult questions. This is essentially because, while the proposal appears based on the theory that there is a "triangular" relationship, no such relationship exists. There is no contract as between the temporary "host" employer and the employee, only as between employer and employee and employer and "host" employer.

In other words, the relationship is employee-employer-"host" employer, with only an indirect link between the employee and the "host" employer.

There is accordingly a question as to the basis on which the “host” employer could be liable to the employee. Liability could only be based on the contract as between the employers, but that is a commercial contract which the employment courts have no jurisdiction to enforce. How, therefore, is the allocation of risk under that contract to be accounted for in any apportionment exercise?

All of which adds up to uncertainty for employers – uncertainty as to the weight which can be placed on contractual indemnities – which may have a “chilling” effect on temporary arrangements and a lack of flexibility in the workplace.

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