Australia: Can I terminate a labour hire employee when the client no longer wants them on a project?

Last Updated: 1 November 2016
Article by Nathan Moy

A recent decision of the Fair Work Commission supports an employer terminating a labour hire employee when his contract was frustrated.

An employment contract requires the employee to provide their personal service to their employer. So what happens when, through no fault of either party, that isn't possible?

Enter the concept of frustration, which brings the contract to an end. In the employment context, this has been limited to circumstances where the employee is imprisoned or physically incapable of performing the contract.

The decision of the Fair Work Commission (FWC) in Donald Pettifer v MODEC Management Services Pty Ltd [2016] FWCFB 5243 looked at whether this concept should apply in labour hire situations, and the indications are that it can, depending on the facts.

A series of unfortunate events for Mr Pettifer

Mr Pettifer was employed as a labour hire employee by MODEC.

MODEC had a contract with BHP Billiton Petroleum (BHP) to provide labour to one of its projects, the Pyrenees Venture. Mr Pettifer was employed by MODEC specifically to work on the Pyrenees Venture.

Following an undescribed incident on 30 October 2015, BHP directed MODEC to remove Mr Pettifer from the Pyrenees Venture. BHP had the absolute discretion to do so under its contract with MODEC.

Despite not agreeing with BHP's characterisation of the incident, MODEC complied with BHP's request.

MODEC then took steps to find Mr Pettifer alternative employment both in Australia and New Zealand. None of those attempts proved fruitful.

On 25 November 2015, MODEC terminated Mr Pettifer's employment contract, relying on the instruction from BHP to remove him from the Pyrenees Venture he was employed to work on and the inability to find suitable alternative employment.

Mr Pettifer claimed he was unfairly dismissed.

A frustrated contract

At first instance, Commissioner McKenna found that the dismissal was not unfair. The Commissioner found that, in practical terms, there was nothing MODEC could have done to keep Mr Pettifer's contract of employment ongoing.

In forming that conclusion, Commissioner McKenna held that MODEC had not relied on Mr Pettifer's conduct in dismissing him (indeed there was evidence that MODEC was sympathetic to Mr Pettifer). Rather, the Commissioner accepted that MODEC had "no alternative" but to terminate Mr Pettifer's employment in circumstances where:

  • MODEC had been directed by its client to remove Mr Pettifer from the Pyrenees Venture; and
  • there was no suitable alternative employment for Mr Pettifer to perform.

Or was it?

Mr Pettifer appealed this decision.

The Full Bench dismissed the appeal.

The Full Bench pointed to the specific facts of this case which included:

  • Mr Pettifer had been employed specifically to work on the Pyrenees Venture.
  • MODEC was contractually obliged to remove Mr Pettifer from the Pyrenees Venture when directed to do so by BHP.
  • Having been removed from the Pyrenees Venture, Mr Pettifer was unable to perform the inherent requirements of the job he was employed to do.
  • MODEC only terminated Mr Pettifer's employment when attempts to find him alternative employment were unsuccessful.

The Full Bench did find, however, that Mr Pettifer's termination related to his capacity to perform his job—as the removal from the Pyrenees Venture meant he could no longer do what his employment contract required.

The Full Bench characterised Mr Pettifer's circumstances as akin to Mr Pettifer being unable to perform his role due to the bar or loss of a licence essential to the capacity to perform his work.

Lessons for employers

Mr Pettifer's case shows willingness from the FWC to expand the basis on which an employment contract might be considered "frustrated" due to the incapacity of the employee to perform their duties.

This is particularly significant in the labour hire context, where employers may find themselves in the unenviable position of having to deal with an employee whom the client no longer wants on their projects.

Mr Pettifer's case provides us with some guidance about what employers can do in this scenario:

  • It can be a valid reason for employers to terminate in this situation, on the basis that the employee is no longer able to perform the duties of their role.
  • FWC still has the discretion to consider if the termination is unfair, and will look at all the circumstances.
  • Factors that might make the dismissal fair in this scenario include:
    • the contractual arrangements in place, in particular whether the client has a right to direct the employer to remove its employees from projects;
    • whether the client's direction to remove the employee from their project(s) effectively means they can no longer do what they were employed to do;
    • the steps taken by the employer to find the suitable alternative employment before terminating the employment; and
    • the opportunity given to the employee to respond any suggestion that they can no longer perform their duties.

If you're an employer in MODEC's situation, you'll need to consider these matters carefully before relying on the frustration of the employment contract as a basis for terminating employment.

It remains to be seen whether Mr Pettifer's case has any broader application outside the labour hire context, and we would recommend some caution in relying on Mr Pettifer's case in different circumstances.


Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.