E. Bassey   Abiodun. O  Alex. O N. Ayantoye

1. INTRODUCTION

A notable fact about workforce and labour is the near certainty that as the earth revolves around the sun, so does the very act of employment. Companies and establishments are always in current need of talented and skilled staff in one area or the other to facilitate the progression of their affairs.

Over the years there has been a paradigm shift in the employment sphere with the introduction of the concept of triangular employment; a concept that is now widely practiced in the Nigerian labour market and as would be expected fast gaining judicial recognition in Nigeria.

This article seeks to examine the nature of triangular employment, its legality under Nigerian law, the various legal issues that the concept throws up and the attitude of courts in Nigeria to same.

To lay a proper foundation for our discourse in this article, it is pertinent to first address some very fundamental terms in employment relationships.

2. THE MEANING OF EMPLOYMENT

Employment in its traditional sense is a relationship between two parties regulating the provision of paid labor services, where one party- the employer, which might be an individual, a corporation, a nonprofit organization, a co-operative, or any other entity, pays the other, the employee, in return for carrying out assigned work.² Employment encompasses all trade, occupation, activity, or work performed in exchange for wages that produces an economic benefit.

The above definition establishes two parties, the employer, and the employee. The one who pays for the talent or skill provided and the one who offers his/her talent or skill.

The Court of Appeal in the case of FCDA v. The Governing Council of the National Industrial Training Fund & Anor,  ³defined an employer as follows:

An employer is defined under Section 15 of the Act thus: “Employer” – means any person engaged in industry or commerce with whom an employee entered into a Contract of Service or apprenticeship and who is responsible for the payment of wages or remuneration to the employee. [Underlining supplied]

Further to the above, the Apex Court in the case of Iyere v. Bendel Feed and Flour Mill Ltd,⁴ defined an employee as follows:

I should add that an employee, except where a different meaning is given in the context of the employment, means an individual who has entered into or works under, or where the employment has ceased, worked under, a contract of employment. A contract of employment connotes a contract of service or apprenticeship, whether express or implied, and if it is express, whether it is oral or in writing. [Underlining supplied]

A close examination of the above definitions by the eminent jurists boils down to the undeniable fact that every employment is a contract and must have the element of a valid contract- being offer, acceptance, consideration, and intention to create legal relations.⁵

It is worthy of note that employment can be formal, informal, temporary, or part-time, depending on the agreement between parties bearing in mind the service to be delivered.

Flowing from the preceding paragraphs, it is agreeable that the traditional sense of employment contracts is usually between two parties i.e., the employer and the employee. However, due to the evolution of employment relationships, an employment relationship known as triangular employment has been introduced into the labour market.

3. TRIANGULAR EMPLOYMENT

An employment relationship normally involves two parties: the employer and the employee. The International Labour Organization (ILO) has acknowledged that there are, however, more complex situations in which one or more third parties are involved, in what might be termed a “triangular” employment relationship or a disguised or objectively ambiguous “triangular” employment relationships.⁶ It can also be referred to as workforce outsourcing, where an organization contracts out employment of its workforce to a third party. It is a situation where an organization hires its workforce through a third party also known as the labour contractor. It is primarily anchored on the concept of secondment.

A triangular employment is unlike traditional employment relationship where the relationship is between two parties (the employer and the employee) with the status of parties often clearly defined. Under a triangular employment, as the name implies, there are three parties involved – the client company (the end-user), the agent or labour contractor and the employee. In a triangular employment, the lines which are usually clear in traditional employment relationships are often blurred.

The labour contractors, who are the third parties, act as a middleman to recruit and deploy personnel to client companies (the end users). This creates a triangular relationship between the labour contractor, the outsourced staff, and the client company.

Triangular employment is a cost-efficient way to mitigate liabilities that could arise out of direct employment. Business organizations usually outsource the operational aspects of their business in order to focus on the fundamentals of their business. For instance, a law firm could outsource its recruitment and on-boarding needs to a human resources or recruitment agency. Some tele-communication companies outsource their customer care support processes to other companies. Also, a company may choose not to hire cleaners and security staff and outsource these functions to companies that will provide the personnel to render these services. All these situations result in a triangular employment relationship.

4. LEGAL FRAMEWORK REGULATING TRIANGULAR EMPLOYMENT

The legal basis of workforce outsourcing or triangular employment in Nigeria has been traced to section 91(1) of the Nigerian Labour Act⁷ which defines an ‘employer’ as:

…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. (Emphases supplied).

A literal interpretation of the definition of an employer by section 91(1) of the Labour Act presents the visage of a triangular employment relationship whereby a person is recruited by one person to provide his services for another. This was given judicial recognition by the National Industrial Court when it, relying on section 91(1) of the Labour Act, declared labour outsourcing as a legitimate and lawful enterprise in the case of Petroleum and Natural Gas Senior Staff Association of Nigeria v. Mobil Producing Nig. Unlimited.⁸ 

5. LEGAL ISSUES THAT OFTEN ARISE IN A TRIANGULAR EMPLOYMENT

Who is the employer of the outsourced staff?

In a triangular employment, the contract is between the labour contractor and the outsourced staff. No such contractual relationship appears to exist between the outsourced staff and the client company. This usually creates a legal problem as to who (between the labour contractor who hired the outsourced staff and the client company who takes benefit of the services of the outsourced staff) is the real employer, who would assume the common law and contractual duties of an employer towards the staff.

Unless the question of who the real employer of the outsourced staff is clearly answered, the outsourced staff may find himself in a situation where he suffers certain wrongs such as wrongful termination of employment, an accident or unfair labour practice in the course of providing his services to the end-user, without being able to seek redress against either the labour contractor or the end-user because he is unable to establish that either of them is his employer. Third parties may also find themselves in a situation whereby they are unable to establish who to hold vicariously liable in the event that the outsourced staff commits a tort against them in the course of providing his services to the end-user. Thus, a determination of the real employer of the outsourced staff is key to a resolution of other legal issues that may arise out of the arrangement between the labour contractor, the outsourced staff, and the end-user.

We shall now proceed to consider the judicial attitude to legal issues arising from triangular employments in two jurisdictions, i.e., the United Kingdom and Nigeria.

Position of courts in the United Kingdom

In the case of Dacas v. Brook Street Bureau (UK) Ltd, ⁹Mrs. Patricia Dacas entered into a “temporary worker agreement” with Brook Street Bureau (BSB), an employment agency. BSB had a contract with Wandsworth Borough Council (“the Council”) as its client, under which it provided the Council with staff. Mrs. Dacas was assigned by BSB to work as a cleaner at a hostel run by the Council. The Council paid BSB for her services, whilst BSB in turn paid Mrs. Dacas. The agreement between BSB and Mrs. Dacas made it clear that its provisions did not give rise to a contract of employment with either BSB or the Council. Mrs. Dacas worked exclusively for the Council for a period of four years until she was dismissed for alleged rudeness to a visitor to the hostel where she worked. She brought proceedings against both BSB and the Council at the Employment Tribunal (ET) for unfair dismissal.

The ET in its decision held that Mrs. Dacas had neither a contract of service with BSB, nor any contract at all with the Council and therefore dismissed her claim. On appeal to the Employment Appeal Tribunal (EAT), the EAT set aside the decision of the ET in part and held that Mrs. Dacas worked under a contract of service with BSB. On a further appeal to the Supreme Court of Judicature, Court of Appeal Division (“the SC”), the SC, set aside the decision of the EAT and held that Mrs. Dacas had no contract of service with BSB because BSB had no obligation to provide Mrs. Dacas with work, and Mrs. Dacas had no obligation to accept work from BSB. The SC further held that the fact that BSB had paid Mrs. Dacas did not make BSB her employer. Instead, it was possible that there was an implied contract between the Council and Mrs. Dacas considering the facts that the Council exercised the relevant control over Mrs. Dacas and her work, and there was mutuality of obligation, in that Mrs. Dacas, whilst at the workplace, was under an obligation to attend work and do as she was told by the Council, while the Council was under an obligation to pay for her work, which it did through BSB. The SC stated that if Mrs. Dacas had appealed the decision of the EAT that there was no employment contract between her and the Council, it would have sent the case back to the ET to try the issue whether there existed an employment contract between the Council and Mrs. Dacas as they thought an employment contract would exist between Mrs. Dacas and the Council after ‘considering all the evidence’. But since Mrs. Dacas did not appeal against that finding by the EAT, the SC did not make a binding decision on the point but only noted that the facts of the case were capable of giving rise to an implied contract of service between Mrs. Dacas and the Council.

In Cable & Wireless Plc v. Muscat,¹⁰ a triangular employment case, the UK Court of Appeal in coming to the conclusion that the respondent in that case was employed by the end-user relied on Dacas v. Brook Street Bureau (UK) Ltd and held thus:

The essentials of a contract of employment are the obligation to provide work for remuneration and the obligation to perform it, coupled with control. It does not, in our view, matter whether the arrangements for payment are made directly or indirectly.

The jurisprudence arising from the foregoing cases in the UK is that for the court to determine that there is a contract of employment between two parties, there must exist an obligation to provide work and obligation to perform it, coupled with control. Once these features exist, the courts would determine that a contract of service exists between the relevant parties not withstanding that there may not exist an actual contract of employment between them.

The Position of courts in Nigeria

The position of the law before the advent of the concept of triangular employment was 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 outsourcing agency and not the end-user. This position is largely based on the principle of privity of contract which states that a contract cannot be enforced by or against a third party even if it was made for his own benefit, and the principle of sanctity of contract, which states that the court’s duty is to construe and enforce the contract between the parties to give effect to the wishes of the parties as expressed in the contract document and not to re-write the contract. The National Industrial Court of Nigeria has however, in appropriate cases, rejected the notion of privity and sanctity of contracts and found a remedy for an aggrieved staff.

It is worthy of note that in Nigeria, there is no provision in the Labour Act regulating triangular employment. However, the courts have used the principle of “primacy of fact” as the yardstick for determining who the employer is in a triangular employment. This principle was extensively discussed by the NICN in Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) v. Mobil Producing Nigeria Unlimited (MPNU), ¹³where the court stated as follows:

…In the instant case, the disguised employment relationship of the parties comes in the form of a triangular employment relationship …The triangular employment relationship comes in a variety of forms the best known of which (and which relates to the instant appeal) is the use of contractors and private employment agencies. See The Scope of the Employment (ILO Office: Geneva), 2003 at pages 37-39. To the ILO – … The determination of the existence of an employment relationship should be guided by the facts of what was actually agreed and performed by the parties, and not by the name they have given the contract. … This is known in law as the principle of the primacy of fact, which is explicitly enshrined in some national legal systems. This principle might also be applied by judges in the absence of an express rule…

It is in this context that one can understand the notable pronouncements of the NICN in the case of Anthony Agum v. UNICEM & Anor. In that case, UNICEM entered a service contract with MS Outsourcing Services (MSO) to provide and manage drivers, cooks, and stewards. Further to this agreement, MSO employed the Claimant and assigned him to UNICEM. There was no contract of employment between the Claimant and UNICEM. The payment of the Claimant’s salary was the sole responsibility of MSO. In its decision, the NIC found that the Claimant had established a “triangular employment relationship”. The court declined UNICEM’s argument on privity of contract. The court then held that the Claimant was well within his right to bring the action against both UNICEM and MSO as co-employers.

Similarly, in Mr. Morrison Owupele Inimgba v. Integrated Corporate Services Ltd. & Anor,¹⁵ the 1^st Defendant – Integrated Corporate Services (ICS) – employed the Claimant and assigned him to the 2^nd Defendant (Ecobank Nigeria Plc) to work as a transactions officer. There was no written contract between Ecobank and the Claimant. Nevertheless, the NIC held that ICS and Ecobank were the Claimant’s co-employers. The Court relied on the ICS’s offer letter which stated that the Claimant was employed as a transactions officer and seconded to Ecobank. This reasoning was based on the Supreme Court case of Union Beverages Ltd. v. Pepsi Cola International Ltd ¹⁶where the court held that “if the companies are to all intent and purposes one, their corporate veil could be pierced and each could be held liable for the action of the other. If one company can be said to be the agent or employee, or tool or simulacrum of another, the two companies would be treated as one”

The Nigerian decisions have largely relied on the co-employer principle, where both the labour contractor and the client company or end-user are held liable as co-employers of an employee in a triangular employment relationship. However, for a triangular employment claim to succeed, the claimant must show some relationship with the client company (end user). The relationship can be day-to-day control or supervision by the end user. It can also be payment of the claimant by the provider (main employer) from the funds received from the end user for the services rendered by the claimant. Co-employment can also arise where the claimant shows that the end user exercised great control over the claimant’s services; or that the claimant is subject to some disciplinary measures imposed by the end-user without recourse to the main employer.

The courts have stated that a relevant factor in determining the true position of the case is considering whether or not the triangular employment relationship is a sham. In making a finding, 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 example, in Oyewumi Oyetayo v Zenith Bank Plc,¹⁷ the NICN held that both Zenith Bank and its subsidiary, Zenith Securities Limited were co-employers of the Claimant based on the co-employer principle. The court rejected the argument of Zenith Bank that the transfer of the Claimant to its subsidiary, Zenith Securities Ltd and the confirmation of the Claimant’s appointment as staff of Zenith Securities Ltd presupposes that the Claimant is no longer the employee of Zenith Bank but that of Zenith Securities Ltd, the new employer. Also, in Olalekan Kehinde & Anor v. Airtel Nigeria Ltd & Anor.,¹⁸ the NICN gave little weight to letters of offer of employment and fixed term employment contracts issued to the Claimants by third parties. The rationale for the decision was that Airtel initially employed the Claimants, confirmed them, and even reviewed their salaries before it orchestrated their movement from one employer to another, all for its benefit but these movements were not meant to bring to an end the employer-employee relationship between Airtel and the Claimants.

What Trade Union, are outsourced staff qualified to join?

To determine the proper union that an outsourced staff should belong to, a distinction has to be drawn between labour contractors and service providers. Section 40 of the 1999 Constitution of the Federal Republic of Nigeria and the ILO Convention on the Freedom of Association and Protection of the Right to Organise No. 87, workers have the right to join a trade union and bargain collectively. Section 1(1) of the Trade Unions Act ¹⁹also supports the right of every employee to join any trade union and this has been upheld in the case of Igbozor v. Offiong & Ors.²⁰

The trade union membership in Nigeria is industry based. An employee cannot be a part of a trade union outside his industry, this is the jurisdictional boundary of trade unions in Nigeria.²¹ When a contractor supplies only general personnel with no specific technical service, such contractors are deemed to be labour contractors, but when they supply technical or special services, such employers are service contractors. Personnel deployed by labour contractors are eligible to join the trade unions recognized by the client’s industry; the personnel deployed by service contractors can only join trade unions of the industry of their primary employer. This position was well expressed in NUPENG v. MWUN.²²

6. CONCLUSION

What is obvious from the foregoing analysis of the various judicial authorities is that the question of who the employer is in a triangular employment relationship is a question of facts. Thus, any claimant must present sufficient evidence to show that there is in existence between him and the end-user a mutuality of obligation to provide work and obligation to perform the work, coupled with control to succeed in the UK, whilst in Nigeria the courts would examine the facts to see whether the contract of employment was a sham and unravel it to establish a co-employer relationship.

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For further information on this article and area of law, please contact.
Emmanuel Bassey, Abiodun Ogunnubi or Alexander Onyekwum at:
S.P. A. Ajibade & Co., Lagos by
Telephone: (+234 1 472 9890), Fax (+234 1 4605092)
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Email: ebassey@spaajibade.com, aogunnubi@spaajibade.com aonyekwum@spaajibade.com
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Reference

1. 1. Emmanuel Bassey, Senior Associate, Abiodun Ogunnubi, Associate, Alexander Onyekwum, Associate and Niniolaoluwa Ayantoye, Trainee Associate, all of Dispute Resolution Department, S.P.A. Ajibade & Co., Lagos, Nigeria.
   2. Dakin, Stephen; Armstrong, J. Scott (1989). “Predicting job performance: A comparison of expert opinion and research findings” (PDF), International Journal of Forecasting See https://www.researchgate.net/publication/222302873_Predicting_Job_Performance_A_Comparison_of_Expert_Opinion_and_Research_Findings accessed on 16th October 2023.
   3. See, pp 12 – 13 (paras C – E) (2009) LPELR-8148(CA). Per Abdu Aboki, JCA.
   4. (2008) LPELR-1578(SC). in the words of Ibrahim Tanko Muhammad, JSC.
   5. See, I.E. Sagay: Nigerian Law of Contract Spectrum law series, 2nd Edition 1993.
   6. See, ILO Report, “The Scope of the Employment” (ILO Office: Geneva), 2003 at pp. 25, 37-39, available at http://www.ilo.org/. See also, Stephen Ayaogo & 16 Others v. Mobil Producing Nigeria Unlimited & Anor. [2013] 30 NLLR (Pt. 85) 95.
   7. CAP L1 LFN 2004.
   8. (2013) 32 NLLR (Pt. 92).
   9. [2004] IRLR 358.
   10. [2006] IRLR 354.
   11. Adetoun Oladeji (Nig) Ltd v. Nigerian Breweries Plc (2007) 15 WRN 1 at 15 Lines 40-45.
   12. See, James Adekunle Owulade v. Nigeria Agip Oil Company Limited (unreported) judgment of Hon. Justice Benedict Bakwaph KANYIP, in Suit No. NICN/LA/41/2012 delivered on 12th July 2016 and Ineh Monday Mgbeti v. Unity Bank Plc (unreported) judgment of Hon. Justice Benedict Bakwaph KANYIP, in Suit No. NICN/LA/98/2014 delivered on 21st February 2017.
   13. [2013] 32 NLLR (Pt. 92) 243 (NIC) 322B – 328F.
   14. Unreported Decision of Kanyip, J delivered in Suit No: NICN/CA/71/2013 on March 3, 2017.
   15. (2015) 57 NLLR (Pt. 195) 268 (NIC).
   16. (1994) JELR 44691 (SC).
   17. [2012] 29 NLLR (Pt. 84) 370.
   18. Suit No: NICN/LA/453/2012: unreported judgment of Hon. Justice B. B. KANYIP, delivered December 13, 2016.
   19. CAP T14 LFN 2004.
   20. [2016] LPELR-40100(CA).
   21. See NUPENG v. MWUN [2012] 28 NLLR (Pt. 80) 309.