Labour hire worker tests dismissal rules after removal from site

Can clients end employment by terminating a worker's assignment?

Labour hire worker tests dismissal rules after removal from site

The Fair Work Commission (FWC) recently dealt with a case about whether ending a labour hire worker's client assignment amounted to dismissal from employment.

The worker had spent over eight years at the same client site when she made a delivery labelling error. After the client requested her removal, her labour hire employer said she remained employed, but the worker disagreed and filed an unfair dismissal claim. 

The case focused on whether labour hire workers' employment ends when their client assignment terminates, and what makes a dismissal unfair in labour hire arrangements.

Labour hire dismissal terms examined

The worker started as a casual labour hire employee in late 2015. The labour hire employer's business manager told the FWC that when staff transitioned between agencies, she worked exclusively on placement at the client site, which changed from Central HealthCare to Sigma HealthCare.

She worked 37.5 hours weekly, Monday to Friday, with occasional Saturday overtime. This continued until July 2024, when she swapped delivery labels on two boxes, causing incorrect deliveries.

The client then requested the labour hire employer remove her from the site. The business manager called her on July 21, saying she remained employed while they would look for other work based on her experience and availability.

Labour hire employment status dispute

The labour hire employer presented their template agreement at the hearing. The business manager confirmed this template only came into use in 2022, after the worker started.

The template stated the employer "employs casual employees for on-hire to its clients (Client) to fill such work assignments (Assignment) as its Clients require from time to time according to their operational requirements."

The worker argued each client assignment created a new employment contract. The FWC noted in its decision: "The clear purpose and effect of the Casual Employment Agreement is to establish the contractual framework that will apply to each separate period of a person's employment, if [the employer] offers an assignment to that person and they accept it."

In response, the labour hire employer pointed to later communications about potential work. However, the Commission found:

"I do not consider that [the business manager's] email to [the worker] of 2 September 2024 and his follow-up telephone call to her evidences an ongoing employment relationship. That contact did no more than explore the possibility of [the worker] being offered another assignment."

Labour hire assignment rights explained

The Commission referred to the precedent case Kim Star v WorkPac Pty Limited, noting: "In some cases, the employment relationship between a labour hire company and its employees may subsist in periods where the employee is not placed at a client company. However, whether this is so depends on the applicable contractual arrangements and the factual matrix in which they operate."

The FWC found that ending the worker's assignment on July 21, 2024, constituted dismissal. They noted: "I find it remarkable that [the employer] showed absolutely no resistance to a direction that would result in the termination of an employment relationship which had lasted eight and a half years and was relatively trouble-free."

The Commission emphasised: "If a labour hire employer does nothing to find and offer an employee other work at the conclusion of a placement, then it may be found that there has been a termination employment at the initiative of the employer."

Labour hire unfair dismissal decided

The FWC found the dismissal both unreasonable and harsh, considering the worker's age (68) and service length, stating: "Any loss that [the worker] has suffered as a result of her dismissal stems from [the client's] instruction to [the employer]."

Despite this finding, the Commission concluded: "There is no basis to find that she could have had an expectation that her employment with [the employer] would have continued despite the termination of the assignment. There was no ongoing employment relationship."

The final decision noted: "In the circumstances, any order for compensation would be punitive rather than compensatory." The Commission determined that while the dismissal was unfair, no remedy would be ordered given the nature of labour hire employment arrangements.