The Electrical Trades Union is seeking penalties, claiming the firm was legally obliged to give staff the chance to prove their "internal efficiencies" before deciding to hire external contractors.
In a Federal Court lawsuit filed on Monday, the union claims a slew of outsourcing decisions made between 2017 and 2024 were made without consulting staff.
"Transgrid's ongoing outsourcing has had a damaging impact on the job security of their own employees and has led to safety and reliability issues on the state's electricity network," Electrical Trades Union NSW/ACT secretary Allen Hicks told AAP.
"Every time Transgrid outsources another job, it outsources accountability too."
The firm was required to give internal staff the chance to show they could be as efficient as the contractors, court documents seen by AAP say.
"Transgrid did not consider whether the work to be outsourced could be done by employees utilising their current skills and competencies," the pleadings read.
The company - which was privatised by the NSW government in 2015 - was not allowed to outsource for more than 12 months unless it consulted workers or the union.
It was also required to consider a contractor's quality, health and safety, environmental systems, behaviour and ethics, and compliance before engaging them but did not do so, the pleadings say.
This outsourcing includes work on Project EnergyConnect, a 900km-long transmission line connecting the NSW, South Australian and Victorian grids.
Initially with an estimated bill of $2.1 billion, the total costs of this project blew out to $3.6 billion in January with TransGrid citing COVID-related supply chain impacts, labour shortages, inflation and the war on Ukraine.
The case has yet to come before the court.
Transgrid has been approached for comment.
