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Labour Hire Workers – Who is the employer?

19 May 2015

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  • Employment Law

Many of our business clients at times engage the services of labour hire companies to provide workers for short term projects. The case of SP Group Pty Limited v Tooheys Pty Limited [2013] FWCSB9605 examined who the employer is in these arrangements.

The Full Bench of the Fair Work Commission has confirmed that genuine labour hire agencies are generally the employer of workers supplied under a labour hire agreement, even where the company who the workers are performing the work for exercise a large degree of control over those workers. The Commission rejected the argument that the labour hire company and the hiring company were joint employers of the relevant workers. The Commission confirmed that the concept of joint employment is not endorsed by Australian authorities.

The Commission held that the fact that Tooheys exercised a large degree of control over the workers did not mean that Tooheys was the employer. The Commission noted that “from a practical point of view, it is necessarily a fundamental feature of any labour hire arrangement that the hire of the labour is able to exercise a large degree of management control over the performance of the work of the hired workers and is also able to integrate them to a significant degree in to its existing work systems”.

Employers who are entering into labour hire arrangements generally do so with the intention that they will not be the employer of the relevant workers. In light of this case, employers should ensure that any agencies engaged are independent labour hire agencies and the arrangement is an “arm’s length” transaction. This means that the labour hire company should not be a related company, as to avoid any confusion about who the employer is. This will reduce the likelihood of the arrangement being found to lack authenticity and to constitute a sham or a breach of other workplace laws.

Employers should carefully review, and if necessary obtain legal advice about any labour hire contracts. The terms of any contract should accurately reflect the way that the arrangement will operate in practice, and clearly identify that the labour hire agencies is the true employer and that there is no agency or other related relationship between the hirer and the labour hire company.

Any employers unsure of their rights and obligations in entering a labour hire arrangement should contact our Employment Law Team.