Australia: Labour hire and unfair dismissals – Is a dismissal unfair if the host employer excludes the employee?

Last Updated: 14 September 2016
Article by Clayton Payne

A host employer decides to exclude an employee of a labour hire company from their worksite. The employer then terminates the employment of the employee.

Can the employee successfully bring an unfair dismissal claim against their employer, the labour hire company?

This matter was considered by a recent Full Bench of the Fair Work Commissionin Pettifer.

The Facts

The worker was employed by a labour hire company and had been placed with the host employer to provide labour on a floating production, storage and offloading vessel.

The worker was involved in a "near miss" incident with the host employer who consequently directed the employer to remove the worker from the relevant site. Although the employer did this, it did not believe that the worker's conduct justified disciplinary action being taken against him.

As such, the employer tried to find an alternative placement for the worker to no avail. Ultimately the employer terminated the worker's employment.

The Original Decision

The worker brought a statutory unfair dismissal claim in the Fair Work Commission (Commission). The Commissioner hearing the matter at first instance found that as the dismissal did not relate to issues of the worker's capacity or conduct, the question of whether the reason given to the worker for the dismissal was valid (for the purposes of determining if the dismissal was "unfair"), did not arise.

The Commissioner ultimately found in favour of the employer.

It was in part on this latter point, relating to the matter of "valid reason", that the worker appealed the decision.

The Appeal

A Full Bench of the Commission, granted leave for the appeal to be heard. This was primarily because the Full Bench considered that the appeal raised broader questions associated with the obligations of labour hire employers.

While the Full Bench found that the Commissioner at first instance was wrong in finding that the worker's "capacity" in particular was not a factor leading to the termination of their employment, it ultimately dismissed the appeal. It found that the dismissal occurred because the worker did not have capacity to perform the duties which he was engaged to perform (i.e. because the host employer would not have him back on its worksite) and he could not be redeployed elsewhere by the employer.

The Full Bench went on to find:

"(The employer) was ... contractually obliged to remove (the worker) from (the host employer's worksite) if instructed to do so. This was the role which (the worker) was employed to perform. No longer capable of performing the inherent functions of this role, (the employer) sought to find alternative employment for (the worker). Only after exhausting these inquiries did (the employer) rely on this reason to terminate (the worker's) employment. In these circumstances, the Full Bench is satisfied that (the employer) had a valid reason relating to (the worker's) capacity to terminate his employment and only exercised this reason because it genuinely was unable to find suitable alternative employment for him".

It was noted by the Full Bench, distinguishing another decision of the Commission, that it had evidence of the terms of the contractual relationship between the employer and host employer. That said, the Full Bench found that even in circumstances where a host employer can exercise a contractual right to remove a labour hire employee from its site, and the employee is later dismissed because of that by their employer, the Commission still has the discretion to decide that a particular dismissal was unfair in all the circumstances.


The Commission will look at all of the circumstances of a case, as are relevant, to determine whether a dismissal is unfair. However, labour hire employers, which have a valid reason to terminate a worker's employment because a host employer exercises its contractual rights, may be in a position to successfully defend an unfair dismissal claim.

In this case, the Full Bench noted that the host employer had gone to some lengths to find the worker alternative employment – it was not simply a case that the employer washed its hands of the worker.

One would also think that the terms of the contract between the worker and the labour hire employer could also come into play. If, for example, the worker was engaged in a pool of employees working with numerous host employers in similar circumstances, and one host employer decided to exclude that worker from its worksite, the Full Bench's decision might have been different. One would expect that in the current matter, noting the findings relating to the "inherent functions" of the worker's role, the worker's position with the employer was very much focused on providing services to a particular host employer. When that host employer would not have the worker back, there was probably little more that could be done, apart from what the employer had tried to do.

As with any termination of employment initiated by an employer, a thorough consideration of the surrounding circumstances should be undertaken before a dismissal is affected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Clayton Payne
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