There has been a growth in the use of agency workers (also known as labor hire workers) in New Zealand over recent years. Yet unlike most comparable countries, there is no legislation specifically aimed at ensuring these workers are treated fairly—both by their employers (i.e., labor hire agencies) and their “hosts” (i.e., companies for which they perform work).

Currently, agency workers often “fall between the cracks” between the two types of workers in New Zealand: employee and contractor. In some cases, they are engaged by a labor hire agency as an independent contractor to that agency and therefore enjoy no protection against dismissal and few benefits. This is despite the fact that they sometimes work full-time for the host in a manner that is very similar to that of the host’s employees, with the host often exercising extensive control over their activities. In other cases, labor hire workers may be employed by a labor hire agency (i.e., as a casual employee), but they are still very vulnerable to decisions made by the host because casual employees are employed only on an “as and when required” basis.

The introduction of the Employment Relations (Triangular Employment) Amendment Bill is a small step to changing that trend. The purpose of the bill is to provide employees of a primary employer (i.e., a labor hire agency) who perform work under the control or direction of a secondary employer (i.e., a host) with certain rights that are substantially similar to those of an employee of that secondary employer. This includes an ability for the employee to raise a personal grievance against the secondary employer as well as the primary employer.

In addition, the bill proposes to allow employees the right to coverage under a collective employment agreement to which the secondary employer is a party (where the employee is also a union member of the same union). This would effectively create aspects of an employment relationship between the employee and the secondary employer that currently do not exist under New Zealand law (because agency workers enjoy employment law rights only in relation to the relevant agency; i.e., the primary employer under the bill). It is expected that the bill will be passed in late 2018.

In the absence of any legislation aimed at providing protection to agency workers, a worker seeking to claim would have to assert a legal claim that he or she is in fact an employee of the host company. If successful, that person is then entitled to receive all employee entitlements to which he or she would have been entitled as a regular employee, as well as remedies under the Employment Relations Act 2000 for an unjustified dismissal; for example, compensation for humiliation, loss of dignity, and injury to the feelings suffered as a result of that dismissal.

A recent case, Prasad v. LSG Sky Chefs New Zealand, illustrated this situation. Kamlesh Prasad was hired by a self-described labor hire company as an independent contractor (for a two-year period). The labor hire company provided cleaning services to other companies, including to LSG Sky Chefs New Zealand. LSG relied heavily on these employees, and there was consistent work for them (upwards of 45 hours a week). LSG received benefits from this arrangement. For example, labor hire workers would continue to work when LSG’s regular employees were on strike. However, the longevity of the service of the workers was concerning to LSG, and many were let go because LSG was aware of the risks that the workers could be seen as employees of LSG.

Prasad went on to argue exactly that, and the Court of Appeal recently confirmed the Employment Court’s decision that he was in fact an employee of LSG. The terms of the agreement between the parties, how the relationship operated in practice, and features of control and integration with LSG were all considered in the decision.

Factors that appear to make it more likely that an employment relationship will be found to exist in a labor hire arrangement under the current case law include the following: where the documentation is nonexistent or unclear as to the intended employment status of the worker; the work is of indefinite duration; the work is expected to be provided and is expected to be performed by the individual; a significant degree of supervision, control, and direction is exercised by the host; and performance issues are dealt with by the host.


The Prasad v. LSG case confirms that it is already possible for individuals engaged or employed by labor hire companies to assert that they are in fact employed by a secondary employer; however, the proposed bill would make this process more straightforward, and it represents a step toward recognition of broader categories of workers and employment relationships. A further reason cited for this bill is to combat the issue of migrant exploitation through labor hire arrangements, as migrant workers are prevalent in this sector and often have limited bargaining power and knowledge of the law.

Other commentators have raised concerns about the potential loss of flexibility that currently exists with a labor hire relationship.

Written by Charlotte Joy, Liz Coats, and Rob Towner of Bell Gully and Roger James of Ogletree Deakins