Labour remains an indispensable resource for the economic development and sustainability of any society.  Globally, economies strive to establish comprehensive legal and regulatory frameworks to govern labour relations effectively. As a result, new labour practices inevitably emerge to address evolving societal and economic needs.  One such trend is triangular employment, which employers increasingly favour due to its cost-effectiveness and the flexibility it offers in workforce management. However, employees often perceive triangular employment as an unfair labour practice, as it may deny them access to essential employment benefits and hinder their rights to unionize and engage in collective bargaining.

This article seeks to provide a comprehensive understanding of triangular employment in Nigeria by examining its structure, application, and practical implications, the legal trends, and emerging issues surrounding its adoption within the Nigerian labour framework.

Concept and Nature of Triangular Employment

Triangular employment, unlike the traditional bilateral employment relationship, refers to an arrangement where the employer (often referred to as the original or contracting employer) recruits an employee but subsequently assigns the employee to work for a third-party organization (often referred to as the user enterprise).

The triangular employment creates a three-party relationship comprising the original employer, the employee, and the user enterprise. This marks a significant departure from the traditional employment model, which involves only two parties, i.e, the employer and the employee. The labour provider, which is typically an outsourcing firm, recruitment agency, or labour contractor, enters into a contractual agreement with the worker and assumes responsibility for hiring, payment of wages, and sometimes disciplinary matters.  While the user enterprise directly benefits from the worker’s labour and often exercises control over the worker’s daily tasks, hours of work, and performance standards. This duality in control and obligation creates significant legal and practical uncertainties, particularly with respect to the liability for workplace injuries, enforcement of statutory benefits, job security, and collective labour rights.

Legality of Triangular Employment in Nigeria.

The Legal foundation for triangular employment in Nigeria is traceable to the relevant provisions of the Labour Act (Cap L1, LFN 2004). While the Act does not expressly define or regulate “triangular employment”, it provides a broad definition of the term “employer” that accommodates such arrangements. Specifically, S.91 of the Labour Act 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 [1]

deceased employer.”

A literal interpretation of this provision suggests that an employer may engage a worker either for their own benefit or for the benefit of another, thus providing a legal basis for triangular employment in Nigeria.

This concept has also received judicial recognition in Nigeria, notably, in Petroleum and Natural Gas Senior Staff Association of Nigeria v. Mobil Producing Nig. Unlimited [2], where the National Industrial Court acknowledged the legality of triangular employment and recognized the operational role of a labour provider in such a relationship.

In addition, the International Labour Organization (ILO) also recognises triangular employment as a legitimate, although complex form of work arrangement, noting that such relationships typically involve situations “in which one or more third parties are involved in the employment relationship between the worker and the person benefiting from the work performed.”.[3]

The combined effect of the Labour Act’s broad definition of an employer, the position of the ILO, and judicial precedents supports the legality and applicability of triangular employment under Nigerian law. Thus, over time, Nigerian courts, particularly the National Industrial Court, which has the exclusive jurisdiction over labour matters, have further expanded and clarified the scope of this form of employment, lending legal credence to its existence and enforceability.

However, while legally recognised, the practice remains fraught with legal ambiguities and practical challenges, particularly in terms of assigning employer obligations and ensuring adequate protection for workers engaged under such arrangements.

Contemporary Legal Issues on Triangular Employment.

One of the most pressing legal challenges arising from triangular employment arrangements in Nigeria is the issue of accountability and responsibility. At the heart of the controversy is the question: to whom is the seconded employee answerable, and who bears legal responsibility toward the employee? This is because, unlike the traditional bilateral employment relationships where duties and liabilities are clearly defined between two parties, triangular employment introduces ambiguities, and in the case of a breach, it becomes difficult to identify the appropriate party against whom an action should be instituted.

Also, prior to the advent of triangular employment, the doctrine of privity of contract governed employment relations, ensuring that only the two parties to the employment contract could sue or be sued under it. However, where applied strictly in triangular employment, this would mean that the employment relationship exists solely between the original employer and the employee, while the end-user enterprise, though benefiting from the services, cannot be held accountable under the employment.

Thankfully, this rigid view is increasingly being seen as inadequate in addressing the realities of modern workplace arrangements.

Thus, while there is no express legislation in Nigeria regulating triangular employment, the National Industrial Court (NICN) has played a pivotal role in resolving the uncertainties by establishing principles to regulate triangular employment. These principles include the Primacy of Fact Principle and the Co-Employer Principle.

i. The Primacy of Fact Principle

The Primacy of Fact Principle emphasizes that when determining the existence and nature of an employment relationship, the court must look beyond the written terms of the contract and examine the actual facts and circumstances surrounding the relationship. This principle allows courts to uncover disguised or misclassified employment relationships that may deny workers their rights.

This principle was applied by the National Industrial Court in Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) v. Mobil Producing Nigeria Unlimited (MPNU)[4] where the Court stated thus:

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…

Similarly, in the case of Anthony Agum v. UNICEM & Anor[5], the claimant was employed by MS Outsourcing Services (MSO) and deployed to UNICEM. Despite the absence of a direct contractual relationship between the Claimant and UNICEM, the NICN rejected the defense of privity of contract and held that the Claimant had the right to sue both MSO and UNICEM, having established the existence of a triangular employment relationship between the parties.  This case reinforced the recognition of triangular employment and affirmed the employee’s protection under such arrangements.

ii. The Co-Employer Principle

The Co-Employer Principle posits that where the original employer and the end-user enterprise are related, either by ownership, control, or operational integration, both entities may be deemed employers of the affected worker. This principle is particularly useful in cases involving subsidiaries, parent companies, or sister companies.

In Donatus Onumalobi v. Nigerian National Petroleum Corporation (NNPC)[6], the Supreme Court recognising that both NNPC and its subsidiary, Warri Refining and Petrochemical Company, acted as co-employers held that where an employee is deployed to a subsidiary and terminated by the subsidiary upon the instruction of the parent company, both entities bear legal responsibility for the employee.

This principle was further affirmed in the decision in Oyewunmi v. Oyetayo & Zenith Bank Plc[7], where the Claimant was transferred from Zenith Bank Plc to its subsidiary, Zenith Securities Limited. The NICN rejected the argument of the Defendant that the transfer of a staff member from Zenith Bank Plc to its subsidiary, Zenith Securities Limited, extinguished the claimant’s employment relationship with Zenith Bank Plc. Instead, the Court held that both the parent and subsidiary companies were co-employers of the Claimant and therefore, jointly liable to the Claimant.

Policy and Reform Recommendations

Triangular employment is becoming more common in Nigeria, but the law has not kept pace. While the National Industrial Court has provided some guidance through key decisions, there is still no clear law that regulates this type of employment. To address the legal gaps and protect all parties involved, especially workers, there is a clear need for legislative reform to recognise triangular employment and clearly define the roles and responsibilities of each party. Also, judicial principles such as the Primacy of Fact and Co-Employer doctrines should be codified to ensure consistent application, while labour providers should be licensed and regulated.

CONCLUSION

From the foregoing, it’s undeniable that triangular employment is a growing feature of Nigeria’s labour landscape, offering flexibility for employers but raising significant concerns about employee rights and legal accountability. While Nigerian law does not expressly regulate this arrangement, the courts, particularly the National Industrial Court, have recognised its validity and addressed its complexities through principles like the Primacy of Fact and Co-Employer Doctrine. Given the legal uncertainty that may arise in such arrangements, it is advisable for employees to proceed against both the labour provider and the end-user enterprise where there is doubt. This dual approach ensures that their rights are better protected, regardless of how the court ultimately apportions liability.

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[1] Section 9 Labour Act (Cap L1, LFN 2004

[2]unreported, NICN/LA/411/2016)

[3] ILO Report, “The Scope of the Employment” (ILO Office: Geneva), 2003, at pp. 25, 37-39, available at http://www.ilo.org/

[4] [2013] 32 NLLR (Pt. 92) 243 (NIC) 322B – 328F

[5] NICN/CA/71/2013

[6] (1999) 12 NWLR (Pt. 632) 628 (CA) 639F-640D

[7] [2012] 29 NLLR (Pt. 84) 370 (NIC)

Written by Ovye Israel for The Trusted Advisors

Email us: info@cms.trustedadvisorslaw.com

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