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Interesting case of who's actually the boss


Workers tend to think that if they walk like a duck and talk like a duck, they must be a duck. That is, they think they must be an employee of the organisation that they appear to do work for. Usually this is the case, but not always.

Labour hire companies employ workers who can sometimes be assigned to work for years at a particular organisation, and are under the control of that organisation for the duration of the assignment.

Sometimes the workers are then "dismissed"from their work at the organisation when the labour hire company is told to move them on by the client. The jargon for this is "triangular employment".

Malcolm McDonald entered into an individual casual employment agreement with Allied Workforce, a labour hire company. His day-to-day work consisted of limited-term assignments at various work sites as assigned by Allied.

In March 2007, he was placed with Ontrack Infrastructure as a trainee track worker preparing railway tracks. He worked there for eight months. His role ended because the company introduced a digger operator and he then went back to Allied and accepted further assignments.

He subsequently claimed that he had been unjustifiably dismissed. He sought reinstatement, compensation, lost wages, holiday pay and costs.

Mr McDonald listed both Ontrack and Allied as his employer.

An Employment Relations Authority decision relating to his case came out in the latter part of last year. The authority looked at two main issues - whether Mr McDonald was an employee of Allied or Ontrack, and second, whether he was unjustifiably dismissed.

Both issues raise significant legal issues.

Allied Workforce had selected and offered Mr McDonald the placement at Ontrack. It paid his weekly wages. It invoiced Ontrack for payments made to Mr McDonald weekly and was obliged to pay him regardless of whether or not payment was made by Ontrack.

Allied issued Mr McDonald with payslips. It paid him holiday pay and deducted PAYE.

Aside from those things, it had no communication with Mr McDonald over the eight months he was at Ontrack.

Ontrack periodically recorded the number of hours worked by Mr McDonald and created purchase orders which it forwarded to Allied.

It provided Mr McDonald with training as a track worker and exercised control over him while he was undertaking the track work. It provided him with work equipment and advised him to obtain his heavy traffic licence. It paid him an overnight allowance. At one point, it gave him an in-house booklet only for Ontrack management and staff.

Mr McDonald was told of his termination by Mr Beck, the leader of his work gang at Ontrack.

Two agreements governed the triangular relationship. The first was that between Mr McDonald and Allied. The individual employment agreement governing their relationship said Allied employed Mr McDonald as a casual employee to work on assignments for third parties. It set out his obligations to Allied and the practical workings of the assignment process. It also contained a number of other normal employment conditions.

The second agreement was between Allied and Ontrack. That agreement was in the form of a supplier agreement.

The terms of the agreement provided that Allied was the supplier and that Ontrack was the hirer. The member of Allied was referred to as the "temporary worker". The agreement said the temporary worker supplied to carry out the work "shall at all times be an employee of the supplier and not of the hirer".

Not surprisingly, the authority found that the intention of the parties in the express contractual arrangements was that Mr McDonald was employed by Allied as a casual employee to work on assignments for third parties.

It was not intended in the express contractual arrangements that Mr McDonald would have an employment relationship with Ontrack.

The parties' intentions were not displaced by later conduct. There was no evidence of any mutual agreement between Ontrack and Mr McDonald that he be employed by that company instead of Allied. Nor was there evidence that Ontrack represented to Mr McDonald that the work was of an ongoing nature.

There was no evidence that Mr McDonald advised Allied that he was an employee of Ontrack.

In fact, Mr McDonald accepted further assignments with Allied after his end of placement at Ontrack. While there were departures from the normal way the contractual arrangements would be expected to operate, such as payment by Ontrack of the overnight allowance, this did not displace the express intention of the parties that Mr McDonald was not to be an employee of Ontrack.

The same applied to the legal tests. The authority assessed the question of who employed Mr McDonald using the accepted tests to determine the "real nature of the relationship".

THE question of who controlled Mr McDonald was considered. It was clear from the contractual obligations that Mr McDonald would be under the control of Ontrack.

However, the authority was not persuaded by this that an employment relationship between Ontrack and Mr McDonald existed. The same was said in relation to whether Mr McDonald was integrated, or "part and parcel" of Ontrack.

So, the authority found that the "real nature of the relationship" between Mr McDonald and Ontrack was not one of employment. It also said that there could be no implied employment relationship.

Any subsequent work or conduct of the parties did not change the express arrangements as they existed. Mr McDonald was employed by Allied Workforce Ltd.

The fact that Mr McDonald accepted further assignments from Allied did not help his claim for dismissal when his work at Ontrack finished.

Accordingly, his claim of unjustified dismissal was applicable only to the relationship between Mr McDonald and Allied.

The authority was not satisfied that Allied dismissed Mr McDonald. His termination from the Ontrack job was as contemplated by the terms of business between Allied and Ontrack. The ending of the placement was not dismissal.

This case, while largely focused on who the real employer was, also highlights the nature of casual employment.

Mr McDonald was not obliged to accept further assignments from Allied, just as Allied was not obliged to provide further assignments to him. There was no guarantee of ongoing work, as is the way of casual employment agreements.

The problems of casual employment and the inability of a person to take a case for unjustified dismissal are legion. The question is always whether they were simply not called back in for further work, or whether they were actually dismissed from their employment. There is often an issue of whether they had a legal entitlement of continuing employment or not.

If a casual worker loses their job, it is well worth taking legal advice because they may have a successful claim. The same applies to triangular employment such as that of Mr McDonald.

If triangular employment relationships cause social concern, because the perceived employer has no liability or responsibility, then the issue can really only be resolved by legislation. It seems in Australia the issue became a political hot- potato and there were inquiries about whether to make the beneficiary of the labour the employer.

No legislative changes followed. The real problem is where the technical employer is a "man of straw", and the "real employer" is able to hide behind that. However, that doesn't seem to be the issue here, and what the parties contractually decided to do is what the authority enforced.

Sadly, Mr McDonald probably got little more than a legal bill and maybe costs to pay the other side.

Cullen - The Employment Law Firm was one of the first eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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