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New Zealand Employment Court rules LSG Sky Chefs is the real employer of agency workers

30 November 2017 Feature
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The New Zealand Employment Court has issued a major decision in a case brought by the IUF-affiliated E Tū on behalf of two agency workers who were employed at airline catering giant LSG Sky Chefs. Under New Zealand law, workers have the right to seek a declaration that they are employees, and therefore entitled to the legal protections this status provides. The union requested the Court declare that they were employees, not fictitious 'independent contractors', and that the real employer was LSG Sky Chefs.  The Court agreed. The workers are now eligible for back pay claims.

E tū Assistant National Secretary, John Ryall called it "A huge victory for the labour hire workers at LSG," where labour hire workers who are union members are now entitled to the superior pay and conditions included in the LSG Collective Agreement for directly employed workers, and "A victory for the growing number of workers who aren't directly employed by the firms they work for and are deprived of their rights under New Zealand employment law."

The decision documents a classic case of legal obfuscation in the service of exploitation. It exposes the fictions underlying the frequent claim that labour hire workers are 'independent contractors' and insists that in a triangular employment relation it is the company which exercises effective control over the workers, not the formalities of contract law, which determine who is the real employer.

Both of the workers had been employed continuously at LSG Sky Chefs for extended periods, working full time. They were paid the minimum legal wage or only slightly above, with no holiday, sick leave or pension entitlements and had to themselves pay for insurance against injury.

In the court proceedings, LSG Sky Chefs explained the presence of large numbers of contract workers as a response to "seasonal fluctuations" in workload. This claim, noted the Court, "was not supported by the evidence. Rather, over time the figures reflect a consistent pattern of hours worked, at consistently high levels."

According to the Court, "The labour hire arrangement evidently suited LSG. It meant that the company was not troubled by the usual responsibilities and liabilities associated with an employment relationship.  As the contemporaneous documentation reflects, another identified spin-off benefit was that Solutions workers would be able to work through any strike action by LSG employees."

When LSG eventually became concerned about potential legal risks arising from the employment scam, it sought to negotiate an arrangement with the labour hire firm that would offload any potential legal liabilities - and costs - onto the agency, Solutions Personnel Limited. Any such issue, according to the Court documents, would be "sorted and settled immediately by Solutions" and at its cost, and would "never reach to a level that may affect LSG reputation in business or public."

LSG was clearly worried about issues potentially arising from workers' long periods of continuous service in what was ostensibly a temporary employment solution to 'seasonal fluctuations.' "Can you start moving some of your long servers out and replace them", LSG wrote Solutions. "At your own pace is fine as long as it is at least 1 a week." Six days later, LSG wrote Solutions that a number of long serving workers "had to go." One of those 'let go' was Liutofaga Tulai, one of the two workers in the case, who worked for LSG for 4 years up to more than 62 hours per week before she was 'let go'.

The Court dismissed as 'fanciful' claims that the workers were 'independent contractors': "The plaintiffs were integrated into LSG's business.  They worked alongside LSG employees doing precisely the same work, in precisely the same way, and wearing precisely the same uniforms.  The only distinction, which was not a visible one, was that they were paid less." 

There is however another distinction, which the excellent Court decision, operating within a confined legal framework, fails to note; the scheme violated agency workers' fundamental human rights.