The Concept of Triangular Employment/Outsourcing Suffers a Blow- A Critique of Recent Court of Appeal Decisions

By Folabi Kuti, SAN and Emmanuel Abraye


Court of Appeal decisions in Appeal No: CA/A/1061/2020: Luck Guard Limited v. Felix Adariku & 5 Ors & Appeal No: CA/A/1061/2020 Total E& P Nigeria Limited v Felix Adariku & 5 Ors.


By Folabi Kuti, SAN and Emmanuel Abraye.

Background facts and decision:

Shorn of legal niceties, the facts seem fairly straightforward. Mr. Adariku, on behalf of himself and 257 other ‘co-workers’, had taken Total E & P Nigeria Limited (“Total”) and 6 other companies to which Total outsourced its non-core operations to before the National Industrial Court of Nigeria (NICN). The meat of their complaints was that even as these outsourcing companies were involved in some aspects of their employment relations that they were employed by Total (the end-user), and thus asking the NICN to declare that Total’s failure to issue a document containing particulars of their employment was unlawful and an unfair labour practice, amongst other reliefs. The matter was partly successful at the NICN.

Total appealed the decision of the NICN to the Court of Appeal- Appeal No. CA/ABJ/CV/563/2020.One of the outsourcing companies also filed a parallel appeal against the judgment. That became appeal with docket details: Appeal No: CA/A/1061/2020: Luck Guard Limited v. Felix Adariku & 5 Ors, subject of this critique. Suffice to say that the controlling ratio of the 2 decisions is alike, or much of a muchness.

On appeal, as sometimes occurs in the narrative or lifespan of most appeals, the appeal dealt with objections with relation to the appeal being properly brought as well as four substantive issues to be decided by the Court of Appeal if the appeal was found to be proper. Due to constraint of space and direct bearing on this commentary, this critique is concerned with two major issues raised in the case under review, which in any case, are decisive of the other issues decided by the Court of Appeal. Those issues being:

  1. The claim of an employment relationship between the employees and Total, having not placed letters of employment before the trial Court showing; and
  2. Triangular employment relationship.

On both issues, the Court of Appeal held that the employees failed. We will now, with due respect to the Court of Appeal, show the potential flaws in that decision and why this decision may not be good law.

Potential flaws:

The first potential flaw is as relates to the first issue. Specifically, in resolving the first issue as to whether the claimants were able to show an employment relationship, the Court of Appeal – with respect- seemed obsessed with the rather overarching effect of establishing a contract through a written document. In more specific terms, the Court of Appeal held that those employees were not able to establish that they had a contract because they did not present a written document! The Court here seemed unmindful of a pointed complaint and head of claim in the substantive action filed by the claimants at the lower court: the complaint of denial of formal letters of employment by Total. If the complaint was proven by vica voce evidence to have been validly made, it would amount to commandeering an impossibility that the same claimants would be able to show employment via some documentary detail called ‘Letters of Employment’ which, regrettably, the Court of Appeal, in resolving this particular issue against the 1st respondent, demanded for at the page 23 of the judgment thus:

The 1st respondent did not produce any documentary evidence showing that they were employees of the second respondent at anytime whatsoever. The 1st respondent has a duty to support their averments that they are employees of the 2nd respondent with evidence. The evidence required here is LETTER OF EMPLOYMENT OR CONTRACT OF SERVICE BETWEEN the 1st respondent and the 2nd respondent. It is the document that shows the relationship between the parties and the terms governing the relationship. The letter of termination should be tendered. This are the major documents that are to be examined and interpreted by the court in order to decipher if there is a relation and where there is, whether there was a breach of terms thereof.”

In any event, a contract is not evinced only by a written document. Documentary exclusivity of written contracts relates solely to written contracts alone! Curiously, the selfsame Court of Appeal, having decided at pages 23 – 24, that since the employees did not lead documentary evidence to show their employment relationship to Total, they could not be seen as employees, referred to the provision of section 91 of the Labour Act, which as far back as 1974, imaginatively thought of employment contracts as encompassing oral and implied contracts. Here, my Lord Adah, JCA , at page 25 of the judgment:

Under our Laws, Section 91 defines contract of employment to mean any agreement whether oral or written, express or implied, whereby one person agrees to employ another as worker and that other person agrees to serve the employer as worker.”

For completeness on this issue, it is also pertinent to mention here that the Supreme Court decision in Morohunfola v. Kwara State College of Technology (1990) 4 NWLR (Pt. 145) 506 did not even lay down a general rule that the inability of a plaintiff to plead or tender his letter of employment automatically leads to the dismissal of his case, whilst the principle is trite- almost without the need to cite authorities from the appellate courts – that the failure to tender the letter of employment in evidence will not necessarily be fatal to the plaintiff’s case so long as there is otherwise ample evidence to establish the terms of the contract of employment between the parties See Kaduna Textiles Ltd. v. Umar(1994) 1 NWLR (Pt. 319) 143.  Indeed, the text of the Court of Appeal judgment under review captured what would appear to be overwhelming evidence that the claimants led oral evidence to establish that there was contract of employment in place. We refer to Pg. 23 of the judgment.

Moving to the second issue, much less straightforward, with respect, is the rationale for discussing/resolving the decisive/controlling ratio, the novel issue of triangular employment in less than six short paragraphs, all within pages 25 – 26 of the 33-paged judgment. Here, the Court discussed, howbeit, almost in passing, the International Labour Organization (ILO) literature recognizing what a triangular employment is, and going on to define triangular employment as a “…situation where the employer arranges for an employee’s placement or assignment with a third party.” The Court then introduced the concept of privity of contract as circumscribing general contractual rules and went on to hold that there was no evidence showing a triangular employment relationship between the employees and Total.

It is not clear how the Court reached the decision on the issue of triangular employment relationship. The preceding paragraphs leading to the holding on the triangular employment relationship seemed disjointed or not to run a beeline. The Court did not tie the doctrine of privity to its finding on triangular employment. It would seem that the Court merely introduced those concepts and went on to hold that the employees did not establish that there was a triangular employment relationship. The point needs be made that the Court of Appeal sits as the final court in labour and employment matters, and thus as a policy court issues authoritative guidance on the adjudicatory work at first instance.

Commentary:

The narrow formalistic approach to emergent triangular employment model as one that should simply be construed within the common law doctrine of privity of contract is not simply abstract-doctrinal, but of real practical significance impacting negatively on one of the realities in the new world of work. It may be that the Court of Appeal panel in this case, in what has recently been a worrisome noticeable trend of conflicting Court of Appeal decisions, and from limited research, is the first to make such far-reaching pronouncement on the concept of triangular employment without taking into consideration the guidance set down by the selfsame Court in the panel led by Ogakwu, JCA in Sahara Energy Resources v. Oyebola (2020) LCN/15462(CA) where the Court had deferred to the expertise of specialist judges on labour and employment matters. Referencing, with admirable lucidity, foreign decisions and tertiary sources on the leaning of a specialist court on matters peculiarly within its province or area of specialist adjudication, the Court of Appeal rightly intoned that employment judges have a good knowledge of the world of work and a sense, derived from experience, of what is real there and what is window-dressing.’

The above recommendation in Sahara Energy Resources v. Oyebola (supra) was drawn from the UK Court of Appeal decision in Uber B.V. (UBV) & ors v. Yaseen Aslam & ors [2018] EWCA Civ 2748 (19 December 2018) at paragraph 48 where that Court quoted and applied the UK Supreme Court decision in Autoclenz Ltd v. Belcher [2011] UKSC 41; [2011] ICR 1157, which noted the fact of industrial or employment judges being industrially informed, and in paragraph 49 advised [employment] tribunals to be ‘realistic and worldly wise’ in this type of case when considering whether the terms of a written contract reflect the real terms of the bargain between the parties; and…should take a ‘sensible and robust view of these matters in order to prevent form undermining substance’…”

Having said that and recognizing that the Court of Appeal may have been limited by the literature submitted, the issue of triangular employment perhaps may have been explained a little more, seeing the Court of Appeal in this case treated it as inapplicable, especially as the concept of triangular employment did not emerge as a concept of the Nigerian courts. When the ILO stressed on the primacy of facts when determining the rights, privileges and obligations that flow from outsourcing and triangular employment relationship (disguised employment relationships), it was self-evident that veils must be lifted to see the actual effect of the arrangements made by especially those who command bargaining power i.e., those in the employer group. The very fact that the ILO calls it is all the more revealing and self-evident. Triangular employment relationships have emerged as a result of flexibility of businesses and casual exigencies in a constantly evolving economy or age.

Drawing from the ILO jurisprudence, the primacy of facts is recognized by section 7(6) of the National Industrial Court, Act, 2006 as well as section 254C of the 1999 Constitution (as amended), and the NICN is empowered to apply international best practices and labour standards in the adjudication of labour and employment matters in Nigeria. The NICN is therefore free to draw necessary inferences from the facts before it in deciding who the true employers are.

The current circumstances in the world of work are unique. It is no longer the case that the employment relationship can be as simplistic as contemplated in the decision under review. What would then happen to platform workers or those employed by a joint venture where employees can revolve around several distinct corporate entities who strictly speaking do not have any employment relationship with all the participants in the joint venture. What then happens also to employees in personnel leasing arrangements? It is why the guiding question has always been who is exercising control at any material time over the employee? The expansive definition of the word ‘employer’ in section 91 of the Labour Act itself is instructive and does not conduce itself to the decision in the case under review.

This Court of Appeal judgment therefore sets us back several years in labour jurisprudence. The operation of the doctrine of privity has always operated as a bulwark against jurisprudential development in labour and employment law, particularly taking into cognizance the proliferation of what the ILO terms disguised employment relationship. The doctrine of privity held sway until the jurisprudence on triangular employment came into the fray. Legal practitioners were no longer able to use the doctrine of privity to avoid liability for their clients in a triangular employment relationship. In any event, the privity fallacy operates as a general rule to which Nigerian case law from time immemorial recognised has exceptions.

What is clear today is that decisions of the Supreme Court and Court of Appeal that were delivered before the Third Alteration Act, 2010 should not impinge on judgments of the National Industrial Court made after the enactment of the Third Alteration Act, 2010. The Court of Appeal, being the final Court on labour and employment matters must, with respect, understand the labour and employment jurisprudence emanating from the NICN and find the need to strengthen the jurisprudence.

In holding that there was no evidence to show that the employees were employed by Total, employers of labour may well device a new strategy to employ personnel, deliberately fail to issue employment onboarding documents, transfer the employment to labour contractors, then sanctify themselves from all forms of liabilities, even as they deal with their own employees from a distance. This must never be allowed to happen. It is expected that the Court of Appeal will have another opportunity to revisit this scenario in another case, where the Court will be then able to decide more appropriately.


Folabi Kuti SAN and Emmanuel Abraye, of Counsel, Perchstone & Graeys LP.

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