Three parties in an employment relationship – the riddle in Riddler

Employment relationships are not always straightforward.  When there are three parties involved, things can get complicated.  The Employment Court (the Court) has recently had to untangle just such a situation in Riddler v Meridian Energy Limited [2023] NZEmpC 87. 

The employment situation involved Mr Riddler who was employed by Fujitsu New Zealand Limited (Fujitsu) and provided services to Meridian Energy Limited (Meridian) as a Fujitsu employee.  When relationship problems arose between Mr Riddler and Meridian, Meridian wrote to Fujitsu asking that they remove Mr Riddler from their account and the work that he completed for them.  Mr Riddler was advised of Meridian’s request and told not to return to Meridian’s premises.  Approximately 3 weeks after this incident, Mr Riddler was dismissed from his employment with Fujitsu.   

Following his dismissal, Mr Riddler raised a personal grievance against his employer Fujitsu and entered into a record of settlement in respect of that claim.  This settlement agreement, like many under section 149 of the Employment Relations Act 2000 (the Act) provided that it was in full and final settlement of “all and any outstanding issues or matters between the parties”.

When Mr Riddler raised his personal grievance with Fujitsu, he also wrote to Meridian advising them of the existence of the grievance.  Mr Riddler did so as he believed that Meridian was a controlling third party within the definition provided at section 103B of the Act (see below).  In doing so, Mr Riddler asserted that Meridian’s actions were unjustified and advised that he sought compensation (and costs) from them as well as Fujitsu.  At the Employment Relations Authority (the Authority) Mr Riddler’s claim was struck out, and the determination was subsequently challenged by Mr Riddler.

Controlling Third Party

Section 103B of the Act applies if an employee has:  

  • raised a personal grievance with the employer; and
  • applied to the Authority to resolve a personal grievance with the employee’s employer; and
  • the personal grievance occurred while the employee was working under the control or direction of a controlling third party.

The employee, the employer, or both, may then apply to the Authority or the Court to join the controlling third party to the proceedings.

Meeting those requirements is important as the Authority or the Court must grant the application to join a controlling third party if the Authority or the Court is satisfied:

  • the controlling third party had been notified; and
  • that an arguable case has been made out:
    • that the party is a controlling third party; and
    • the party’s actions caused or contributed to the personal grievance.

The Employment Court

The Court was asked to consider whether Meridian was a controlling third party within the definition in the Act and if so, whether compensation for hurt and humiliation as well as costs should be awarded in respect of Mr Riddler’s alleged unjustified disadvantage grievance.   

Meridian argued that due to the absence of a personal grievance between Mr Riddler and Fujitsu (as a result of the settlement between those parties), there was no justification for the Court to hear the challenge.  In particular:

  • jurisdiction is limited and arises only where a controlling third party is joined to a personal grievance claim;
  • section 103B of the Act only applies where:
    • the employee has raised a personal grievance against the employer and applied to the Authority to resolve it; and
    • the grievance relates to an action that supposedly occurred whilst working under the control or direction of the controlling third party.
  • section 103B of the Act does not anticipate any action against a controlling third party in the absence of a live personal grievance with the employer and Mr Riddler did not have one and could not have one due to his settlement agreement with Fujitsu.

Conversely, Mr Riddler argued:

  • there was an unresolved personal grievance against Meridian (a standalone unjustified disadvantage grievance);
  • the claim against Meridian was for its own unjustified action as a controlling third party and not as a result of the claim against his employer, Fujitsu; and
  • that it is not in the spirit of the legislation to only allow a party to take action against a controlling third party where they are joined to the proceedings with the employer.

Mr Riddler also argued that the Employment Relations (Triangular Employment) Amendment Act 2019 (the Amendment Act) was enacted to give employees in his position “genuine access to employment law remedies” and, given the Court’s equity and good conscience jurisdiction, his claim should succeed.

The Interpretation of Section 103B of the Act

The Court considered the interpretation, purpose and application of section 103B of the Act (joining a controlling third party to a personal grievance), and expressed the view that:

  • “joining” implied that there must be an existing claim to which the party is added;
  • there needs to be a personal grievance raised between an employer and an employee;
  • litigation between the employee and employer is required and not a separate cause of action between the employee and the controlling third party. There is no way to pursue the controlling third party without also raising a grievance with the employer;
  • the action giving rise to a personal grievance must be linked to the controlling third party i.e. occurred whilst under the control or direction of the controlling third party; and
  • the Amendment Act did not create a new type of personal grievance whereby an employee could circumvent the employer and raise a grievance directly with the controlling third party.

The Court also considered the purpose of the Amendment Act which did not contain a statement of purpose.  The Court stated that the Amendment Act’s purpose is:

[45] … to prevent the controlling party from insulating itself from the consequences of its actions by interposing an employer between it and the employee it effectively controls… not to create a new or separate personal grievance.  

The Outcome

When applying the above principles to Mr Riddler’s case the Court found that there were two major roadblocks to his claim for compensation from Meridian for unjustified disadvantage.  The first hurdle is that section 103B of the Act only allows Meridian to be joined as a controlling third party where there is an unresolved personal grievance in the Authority between Mr Riddler and his employer, Fujitsu.  However, as a result of the settlement agreement which Mr Riddler had entered into with Fujitsu there was no proceeding between the parties that Meridian could have joined.  The Court did not accept that section 103B of the Act allowed Mr Riddler to dodge the requirement for an unresolved grievance with Fujitsu and stated that the Court’s equity and good conscience jurisdiction did not apply where the decision would be inconsistent with the Act.

The second hurdle was that the settlement agreement entered into by the parties was comprehensive and prevented Mr Riddler from taking action against Meridian for unjustified dismissal.  The agreement was a bar to litigation.

In this case, the Court found that Meridian’s application to strike out the challenge was successful, and the Authority could continue to consider the cost awards for the claim.

The Message – When Three’s a Crowd

The key message from Riddler is that to join a controlling third party there needs to be proceedings between an employee and their employer that the third party can be joined to.  In the absence of live personal grievance proceedings before the Authority or the Court the provision cannot be used.

If you have any questions regarding three party (triangular) employment relationships or joining parties to employment proceedings, please get in touch with our Employment Team or your usual contact at Hesketh Henry.

Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.


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