APPRAISING TRIANGULAR EMPLOYMENT UNDER NIGERIAN LABOUR LAW
The traditional idea of labour relations typically involves the employer and the employee, with the status and relationship of the parties clearly expressed between them. More recently, however, a trend seems to have settled on this field of law, like morning dews on a green field. Employment relationships now consist of third parties, thus creating an unusual phenomenon known as ‘Triangular Employment’.
With Triangular Employment, labour relationships have become more complex, with roles the parties seemingly overlapping, and their status literally unknown. Furthermore, this ‘triangular’ shift appears to have created a lacuna in the Nigerian Labour Law as the existing legal framework does not exactly fit into the arrangement, especially concerning the rights and protection of employees. This could become even more challenging considering that the employer in the labour relationship is not easily identifiable.
This article appraises the legal framework for triangular employment under Nigerian labour law and what the future holds.
A Triangular Employment relationship involves a labour agent supplying labour to a user firm. In essence, it refers to employment relationships in which individuals rendering services are legally employees of one entity, which provides services under contract to another. Triangular employment relationship exists when employees of a company (‘the provider’) perform work for a third party (‘the user’) to whom their employer provides labour or services. Triangular employment exists in three forms: outsourcing of services, outsourcing of workforce, and services of intermediation. An example of outsourcing of services in the Nigerian labour ecosystem is manifested in the employment of security personnel from guard companies (the providers) who work for different establishments (the user). Outsourcing of workforce is manifested especially in the Nigerian banking industries where banks use workers from HR firms as temp workers. Finally, the services of intermediation are occurring when the provider offers a service to help an individual/ firm (user) to save or borrow money and provides workers who work with the user to that extent.
The idea of triangular employment is based on the legal fiction that the workers provided to the users are the provider’s employees, rather than the employees of the user. Where the provider of labour merely procures the labour but does not actually contract with the employee, the arrangement does not create a triangular employment relationship. This is more so as the intermediary purely acts as an independent contractor for the purpose of recruiting employees for the ultimate user of the labour or service. The intermediary in this case is at best an agent, representing the employer and has no status within the scope of an employment contract.
A triangular employment relationship normally presupposes a civil or commercial contract between a user and a provider. It is possible, however, that no such contract exists and that the provider is not a proper company, but an intermediary of the supposed user, intended to conceal the user’s identity as the real employer.
According to the International Labour Organization (ILO), triangular employment can be summarized as comprising two main scenarios:
- A contract for the performance of work and services; and
- A contract for the supply of labour services.
Tripartite work relations, however, and in particular, employment through employment agencies, come in diametrically different forms and shapes. A common model in Nigeria can be found in security service providing companies, where the provider/security outfit ostensibly employs the security men and then assigns them to a client user, to perform temporary work assignments, commonly under the direction and control of the user.
The legality of Triangular Employment
The principal enactment for the regulation of employment relationships in Nigeria is the Nigeria Labour Act (“the Act”). The Act does not expressly provide the terms, conditions or the modus operandi of triangular employment relations in Nigeria. However, Section 7(1) of the Act provides that a worker should not be employed for more than three months without the regularization of such employment. After three months, every worker, including casual or contract workers, must have their employment regularized by the employer. This should be done by giving a written statement indicating the terms and conditions of employment including ‘the nature of the employment’ as well as ‘if the contract is for a fixed term and the date when the contract expires’. The law presupposes that the terms of an employee’s contract may vary.
The requirement of stating ‘the nature of the employment’ means that there could be different arrangements by an employer regarding the structure of the employee’s contract of service. The law provides a window for employment relationship based on terms agreed by the parties as the provision is omnibus and can validly be construed to accommodate triangular employment relationship, provided the parties involved agreed to the terms.
Even more, the legal basis of workforce outsourcing can also be found in section 91(1) of the Nigerian Labour Act CAP L1 LFN 2004, which defines an ‘employer’ to mean: “any person who has entered into a contract of employment to employ any other person as a worker either for himself or for the service of any other person, and includes the agent, manager or factor of that first-mentioned person and the personal representatives of a deceased employer.”
The phrase “either for himself or for the service of any other person” gives expression to the fact that an employer of labour may employ a staff either for himself of for the service of another person. This puts Labour Contractors to fall within the meaning of an employer under section 91 of the Labour Act. A full panel of the National Industrial Court in the case of Petroleum and Natural Gas Senior Staff Association of Nigeria v. Mobil Producing Nig. Unlimited (2013) 32 NLLR (Pt. 92) declared labour outsourcing has a legitimate and lawful enterprise. Recruiters, however, must obtain a Recruiter Licence issued by the National Electronic Labour Exchange (NELEX), an agency of the Federal Ministry of Labour.
Which ‘Employer’ is Liable in the Event of a Dispute?
The decision of the National Industrial Court of Nigeria (NICN) in Stephen Ayaogo & Others v. Mobil Producing Nigeria Unlimited & Anor  30 NWLR (Pt. 85) 95 suggests that in some circumstances, the Courts are more inclined to holding that the end-user is a co-employer with the outsourcing agency and would share in the liability of the outsourcing agency. According to the NIC, the doctrine of privity of contract is a general principle of contract which is not absolute and admits certain exceptions because the court will carry out an “…enquiry into the merits of the case to reveal the true position of things…”
Furthermore, the NICN in Petroleum and Natural Gas Senior Staff Association v Mobil Producing Nigeria Unlimited Suit No NIC/LA/47/2010 held that the resolution of the question of the party responsible for performing employer responsibilities will depend on the facts found by the Court in each case. In this instance, the Court has held that the determination of the existence of an employment relationship will necessarily be guided by the facts of what was agreed and performed by the parties, and not by the name the parties have given the contract. Thus, the question will be decided based on the facts, irrespective of how the parties describe the relationship.
The Courts have identified a relevant factor in determining the true position of the case – a consideration of whether or not the triangular employment relationship is a sham. In making a finding (of sham), the Courts look at the implementation of the employment relationship based on the facts and circumstances of the case to establish whether the triangular employment relationship is, in fact, a sham arrangement merely for the purpose of avoiding liability as an employer.
The Courts have held that what will constitute a sham would be determined on a case by case basis. For instance, where the termination of a contract of employment of an employee by a company (employer) is on the instruction of the end-user, both companies may be held to be co-employers for the remedy of the employee (National Industrial Court in the case of Petroleum and Natural Gas Senior Staff Association of Nigeria v. Mobil Producing Nig. Unlimited (2013) 32 NLLR (Pt. 92)). It has also been held that where the employer can be construed as an agent of the end-user, the two companies would be treated as one (National Industrial Court in the case of Petroleum and Natural Gas Senior Staff Association of Nigeria v. Mobil Producing Nig. Unlimited (2013) 32 NLLR (Pt. 92)).
In the United Kingdom case of Uber BV v Aslam  EWCA Civ 2748, the English Court of Appeal held that where “armies of lawyers” contrive documents in their clients’ interests which simply misrepresent the true rights and obligations on both sides, and resort in its documentation to fictions, twisted language and even brand new terminology, then the court is more likely to hold the employment relationship to be a sham arrangement (para 97).
However, in his dissenting judgment, Lord Underhill disagreed with the holding of the Terms and Conditions of Uber with its drivers as a sham. In Lord Underhill’s view, there should be no basis upon which the Court could disregard the contractual terms setting out the relationship between the parties. Rather, extending the scope of the protection should be the function of the parliament.
While the triangular employment model is allowed under Nigeria labour law, an end-user may be liable where he exerts a significant measure of control over the employees. as the courts may hold that the relationship is a sham merely to avoid the liabilities of an employer. Where the existence of a triangular employment relationship is brought before the courts, the courts will, in arriving at its decision as to whether the End User is a co-employer, consider the facts of the case. The parties’ characterisation of the relationship is no longer the determining factor; instead, the court will be guided by the facts of what was actually agreed and performed by the parties.
The NICN is also likely to determine that the End-User is an employer if the facts of the case indicate that the triangular employment relationship is a sham, or an objectively ambiguous relationship designed to either mask the identity of the employer or to mask the form in which the relationship was established (e.g. where the nature of the employment relationship is intentionally misrepresented in order to deny certain rights and benefits to employees).
Therefore, in implementing outsourcing agreements, employers should deal with outsourced employed at arm’s length. The end-user must refrain from taking positive actions concerning the outsourced employees. Such actions include but are not limited to determining the terms and conditions of employment of the outsourced staff, disciplining of the outsourced staff or termination of the outsourced employees. A practical approach is to limit the tenure of outsourced employees to two years because the longer they stay, the more difficult it is for the end-user to draw a distinction or apply the arm’s length principle. However, until the labour laws in Nigeria are reviewed and amended to take clarify the law so that the employees know who the employer is, what their rights are, who is responsible for them and bringing them within the employees’ protective legislation, issues in triangular employment will keep arising.
 Petroleum and Natural Gas Senior Staff Association (PENGASAN) v. Mobil Nigeria Unlimited Suit No
About the Author :
Elijah Olawale Agboola is a student of the Nigerian Law School and a member of the Sport Axis Team of Law Axis 360°.