1.1       Introduction

The traditional system of labour relations primarily involves the employer and the employee with the status and relationship of the parties clearly known to each other. However, in recent times, the landscape of employment relations in Nigeria has undertaken a paradigm shift from the traditional employment setting giving rise to several new-generation models. One of such models that have become a preferred option by corporate entities is the triangular employment model.

1.1.1    Emergence of Triangular Employment 

The “triangular employment principle” can be credited to the International Labour Organization (ILO). Ordinarily, an employment relationship involves two parties: the employer and the employee. However, the ILO has acknowledged that there are situations in which three individuals or entities can be involved in employment relations, in what might be termed a “triangular employment relationship” or a “disguised or objectively ambiguous triangular employment relationship”.[1]

Triangular employment relationship occurs when employees of an enterprise (the “provider”) perform work for a third party (the “user enterprise”) to whom their employer provides labour or services.[2] This arrangement can come in different forms – the first is a situation where the user of the employee’s services is not the primary employer. In this type of arrangement, the triangular employment involves three relationships, to wit, the commercial relationship between the outsourcing agency and the end-user; the employment relationship between the outsourcing agency and the employee; and the secondment of the employee from the outsourcing agency to the end-user.

The second form is the disguised employment relationship where the nature of the employment relationship is intentionally misrepresented so as to deny certain rights and benefits to dependent workers. Here, the disguised employer is an intermediary, with the intention of releasing the real employer from any involvement in the employment relationship and above all from any responsibility to the workers. Such contract manipulation results in a lack of protection for the workers concerned. A typical example is contracts concluded for a fixed term, or for a specific task, but which are then repeatedly renewed, with or without a break, and thus precludes the worker from obtaining the benefits provided to employees by the relevant labour legislation.

Triangular employment arrangements usually create the problem of who should perform the obligations of the employer. The questions posed by this problem are; who is an employee in law and secondly, who is the legal employer under the relationship.

1.1.2    Legal Issues arising from Triangular Employment

The legal issue that may arise on the part of the employer in this type of employment relationship is, who is the employer recognized by law. Is it the outsourcing agency or the end-user who controls the employee in the course of duty and also enjoys privity of contract with the employee?  On the part of the employee, the legal issues are: who is my employer? What are my rights? Who is responsible for ensuring my rights?

To answer these questions is very important as the party adjudged to be the employer will have concomitant legal obligations to the employee in triangular employment. It is also crucial to all parties in the relationship as the answers will determine the obligations and rights of the respective parties towards the other.

The various factors often considered in resolving these issues are; does the end-user have a right to punish the employee (who in actual sense is not his employee)? Who has the obligation to enroll the employee on statutory benefits like National Health Insurance Scheme, Employees Compensation, Pension Scheme, etc.?

Furthermore, the vague position of the employee’s real employer presents a technical difficulty as the employee may find himself interacting with two (or more) employers, each of whom assumes certain functions of a traditional employer. Unfortunately, the employee is the weakest party in this tripartite employment relationship and therefore does not have the bargaining strength to secure a fair deal by contract either from the outsourcing agency or the end-user.

1.1.3 Nigeria position on the concept of Triangular Employment

The Nigeria labor law and its subsidiary legislations are silent on the issue of triangular employment because the drafters of these laws did not envisage the evolution of triangular employment. The position of the law before the advent of the concept of triangular employment is that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract. Thus, in the event of any dispute arising from triangular employment relationship, the employee can only maintain an action against the employment agency and not the end-user. This position is largely based on the principle of privity of contract.[3]

The principle of privity of contract portrays that the fact that a person who is a stranger to the consideration of a contract but stands in such near relationship to the party from whom the consideration proceeds (that he may be considered a party to the consideration) does not entitle him to sue or be sued upon the contract.

The National Industrial Court was called upon to determine the issue of triangular employment in the case of PETROLEUM AND NATURAL GAS SENIOR STAFF ASSOCIATION V MOBIL PRODUCING NIGERIA UNLIMITED.[4]The court in deciding the nature of employment of the parties relied on the ILO Convention and held that the determination of the existence of an employment relationship will be guided by the facts of what was actually agreed and performed by the parties, and not by the name the parties have given the contract.[5] The court went further to state that, the question will be decided on the basis of the facts, irrespective of how the parties describe the relationship. Also, in STEPHEN AYAOGO & ORS V. MOBIL PRODUCING NIGERIA UNLIMITED & ANOR[6] it was also held that the courts are likely to hold 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 NLC, 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 “…enquiry into the merits of the case to reveal the true position of things…”

Flowing from the decisions of the National Industrial Court, the question that comes to mind is; in what instance would the Courts be willing to hold that the end-user is also liable to the employee for obligations required of an employer? In answering this question, the courts will 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 recourse of the employee. It has also been held that where the employer can be construed as an agent of the end-user, the two would be treated as one. Thus, where there is evidence of major control or involvement by the end-user in the affairs of the employee it will be construed that the triangular employment is a sham. Evidence of control may be gleaned from the following:

  1. Recruitment: Is there proof of significant participation in the recruitment of the employee? Does the final decision rest with the end-user?
  2. Supervision and Direction: Does the end-user conduct appraisals, set yearly objectives, and give directives to the employee including setting the terms for remuneration, benefits, holidays, amongst others?
  3. Discipline: Does the end-user provide disciplinary measures and carry the same out without recourse to the outsourcing agency?
  4. Termination: Is the end-user on his own, absolutely responsible for the termination of employment of the employee?

The answers to the questions posed above will provide an indication as to the measure of control the end-user wields over the employee.

In DACAS V. BROOK STREET BUREAU (UK) LTD[7]the United Kingdom (UK) Court of Appeal was called upon to determine if an agreement between a temporary worker and an employment agency was capable of giving rise to a contract of employment between the temporary worker and the client (end-user). In holding that there is an employment contract between the parties the court stated that the Council exercised the relevant control over Mrs. Dacas and her work, and there was mutuality of obligation, in that Mrs. Dacas, while at the workplace, was under an obligation to attend work and do as she was told, while the Council was under an obligation to pay for her work, which it did through the agency.[8] Also in Cable & Wireless Plc v. Muscat[9], which is a triangular case, where one works for an end-user but is paid by an agency the Court of Appeal held thus:

“A judge should consider the whole evidence to find an implied contract, following Dacas. A contract is to be inferred when it is necessary to give business reality to the relationship, and where both mutuality and control by an end-user are present. It did not matter whether remuneration was paid by the agency, as long as it was ultimately paid by the end-user.”

  1. 2 Conclusion

In view of the foregoing, it can be argued that triangular employment model is not prohibited under Nigerian law. However, an end-user may have potential exposure where he exerts a significant measure of control over the employee as the courts may hold that the relationship is a sham merely to avoid the burden/ liabilities of an employer.

Author: Chibuzor Ofoha


[1] ILO The Scope of the Employment Relationship (ILO Report V) International Labour Conference 91st Session Geneva 2003 page 38

[2]ibid.

[3]See, Dunlop Pneumatic Tyre Co. Ltd v. Selfridge Limited (1915) AC 847 at 851

[4] Unreported Suit No. NIC/LA/47/2010 delivered on 21st March, 2012

[5] Ibid

[6](2013) 30 NLLR (Pt. 85) 121 NIC

[7] [2004] IRLR 358

[8]https://app.croneri.co.uk/law-and-guidance/case-reports/dacas-v-brook-street-bureau-uk-ltd-2004-irlr-358-ca

[9] [2006] IRLR 354