Australia: Labour hire agreement justified termination of employment

Last Updated: 24 October 2016
Article by Laura Gallagher

An employee dismissed by a labour hire company at the request of a host employer was not unfairly dismissed, in circumstances where the labour hire employer was fulfilling a contractual obligation to remove an employee from the worksite.

In Pettifer v MODEC Management Services Pty Ltd [2016] FWCFB 5243 , the Appellant had worked for labour hire company MODEC Management Services Pty Ltd ('MODEC') since 2009, with an "unblemished" record. Pursuant to a contract between MODEC and BHP Billiton Petroleum Inc (BHPB) for the provision of labour for the 'Pyrenees Venture', the Appellant was placed at a BHBP worksite. Following what BHPB alleged to be a "near miss" incident, MODEC was directed by BHPB to remove the Appellant from the site . MODEC acceded to BHPB's direction to remove the Appellant.

The Appellant first instituted proceedings in the Fair Work Commission under the unfair dismissal provisions in Part 3 - 1 of the Fair Work Act 2009 ("the Act"). Section 394 of the Act provides relief to an employee who has been dismissed, if that dismissal is deemed harsh, unjust or unreasonable. Pursuant to section 387 (a) - (h), criteria for considering harshness includes, inter alia, whether there was a valid reason for dismissal relating to capacity or conduct, whether the person was notified of the reason and given an opportunity to respond, whether there was an unreasonable refusal to allow a support person and any other matters that the Fair Work Commission considers relevant.

The Appellant initially alleged, amongst other factors, that his termination was harsh, unjust or unreasonable as he had a lengthy period of service and an "excellent" employment record. The Respondent submitted it did not terminate the worker's employment due to any findings of misconduct, but rather through the enforcement of a clause in the contract between MODEC and BHBP, which provided BHBP could direct MODEC to remove an employee if it was in the best interests of the project.

At first instance, Commissioner McKenna held the termination was not harsh, unjust or unreasonable. In coming to this decision, the Commissioner did not believe the question of whether or not there was a valid reason for dismissal relation to capacity or conduct was relevant.

The Applicant appealed this decision to the Full Bench on the basis that the Commissioner erred in finding MODEC did not rely on the Appellant's capacity or conduct in its decision to dismiss him, and asserted he was, in fact, dismissed for a reason relating to his capacity or conduct as his dismissal occurred as a result of BHPB forming the view that "his conduct demonstrated unacceptable safety behaviour".

On appeal, the Full Bench quashed Commissioner McKenna's decision that there was no need to address whether or not there was a valid reason for the dismissal. Therefore, to determine whether or not there was a valid reason for termination, the Full Bench noted the reason must be judged not by the existence of a legal right to terminate, but by "the existence of a reason for the exercise of that right".

Considering the relevant clause in the contract, the Full Bench concluded that MODEC was contractually obliged to remove the Appellant from the site if instructed to do so, and that this being the case, the Appellant was no longer able to perform the inherent functions of his role with MODEC. Importantly, the Full Bench noted MODEC had sought to find alternative employment for the Appellant and it was only after exhausting alternative employment options that MODEC exercised its reason to terminate.

In its decision, the Full Bench noted the case of Kool v Adecco Industrial Pty Ltd T/A Adecco [2016] FWC 925, where it was held that an employer cannot rely exclusively on the actions of the third party as a defence to unfair dismissal. This case was distinguished from the present case, however, in that the factual situation was "somewhat different" and the terms of the contractual relationship in that case were not provided as evidence.

Further, the Full Bench considered in accordance with section 387 of the Act that the Appellant was notified of the reason for dismissal and was given an opportunity to respond. It was held there was no evidence of a refusal to allow a support person and the dismissal was not related to unsatisfactory performance. In consideration of other relevant factors, the Full Bench noted Commissioner McKenna's consideration of the extent to which MODEC made endeavours to obtain suitable employment for the Appellant.

The Full Bench ultimately held that MODEC was contractually obliged to remove the employee from the worksite. Accordingly, the Full Bench upheld the decision at first instance that the dismissal was not harsh, unjust or unreasonable.

Implications

The Full Bench noted the increasingly commonplace practice of labour hire arrangements whereby host employers have a contractual right to exclude a labour hire employee from its worksite. This case demonstrates that employees seeking protection under the Fair Work Act 2009 may not be successful in establishing that a dismissal was harsh, unjust or unreasonable where the employer is fulfilling such a contractual obligation.

Further, this case illustrates the importance of labour hire employers exploring suitable redeployment for an employee, in circumstances where they have had to remove them from a worksite.

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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