Worker argues client company exercised 'employer-like control' over daily duties
The Employment Relations Authority recently dealt with a labour hire dispute where a trades assistant sought to join the hospital where he worked as a "controlling third party" in his personal grievance case against his direct employer.
The worker was employed by a labour hire company but assigned to work at a hospital for nearly a year before the hospital requested his removal, leading to his immediate dismissal.
He argued that the hospital exercised employer-like control over his daily work and contributed to his dismissal despite not being his legal employer.
Labour hire dispute involves triangular employment arrangement
The worker was employed by a labour hire company from December 2022 and assigned to work as a trades assistant at a hospital operated by a separate health organisation.
The assignment was described as lasting "six months plus" with Monday to Friday hours from 7:30am to 4:00pm, involving general engineering and trades assistance duties.
The worker's employment agreement with the labour hire company documented his role as completing "general engineer duties as directed, assisting trades people with mechanical tasks which will be varied from general tasks such as repairing facilities such as pumps, motors, guttering, pipes etc and other duties as required."
His leave and pay were managed entirely by the labour hire company, while the hospital provided timesheets and paid invoices.
In November 2023, just under a year after starting the hospital assignment, the health organisation asked the labour hire company to cease the worker's assignment. The labour hire company then terminated the worker's employment, with his last day being 1 December 2023 after being paid out for one week's notice period following his final working day on 23 November 2023.
Dispute centres on controlling third party application
The worker raised personal grievances on 7 December 2023 for unjustified dismissal and disadvantage in employment, arguing these were based on matters that occurred in the workplace and the hospital's knowledge or views about these incidents.
He sought to join the hospital as a "controlling third party" under section 103B of the Employment Relations Act 2000.
This provision was enacted in 2020 to address situations "where employees were employed by a labour hire type business but in reality worked under the control and direction of the party that was in a separate contract with the labour hire business to provide it with labour."
Before this provision existed, employees "could find themselves unable to challenge through the grievance process because the 'controlling third party' was not their legal employer."
The definition of "controlling third party" requires a person who has a contract with an employer under which an employee performs work for their benefit, and who "exercises, or is entitled to exercise, control or direction over the employee that is similar or substantially similar to the control or direction that an employer exercises."
The Authority needed to determine whether the hospital met both criteria.
Control and direction in labour hire arrangements
The Authority found that the first requirement was clearly met, as the worker's employment agreement and the administrative arrangements demonstrated that the hospital and labour hire company had a commercial arrangement where the worker performed work for the hospital's benefit.
The Authority noted it was "surprising that a large public entity and an established labour hire company would not have their commercial contract in writing," but accepted the arrangement existed.
For the second requirement, the Authority examined who exercised day-to-day control over the worker.
The evidence showed that the worker "took day to day directions from [the hospital], their subcontractors or through their task allocation procedures and that his day to day performance and interactions were observed by [the hospital] managers."
The Authority found no evidence that the labour hire company "took any active role in [the worker's] day to day direction of work."
The Authority noted that "performance and behaviour observations were fed back to [the worker] by a [hospital] manager" after the worker was told that the hospital no longer wanted him working there.
This demonstrated the hospital's direct involvement in managing the worker's performance and conduct throughout his assignment.
Labour hire dispute establishes contributory role
To join the hospital as a controlling third party, the Authority also needed to find it arguable that the hospital's actions caused or contributed to the personal grievances.
The Authority accepted that "the actions alleged in relation to [the worker's] grievances of disadvantage occurred while he was working when under the control and direction of [the hospital] at the hospital assignment."
Evidence showed that discussions about the worker's performance began as early as October 2023, when the labour hire company "started looking for a replacement at [the hospital's] request." The Authority found that "two different [hospital] managers asked for [the worker] to be replaced according to affidavit evidence."
The hospital argued that one manager "did not realise that [the worker] would be dismissed by [the labour hire company] when asking for him to be replaced," but the Authority noted the absence of a written contract between the parties about how assignments would end.
The Authority concluded it was "arguable that [the hospital] contributed to [the worker] being dismissed by [the labour hire company] after which the latter arguably carried out no process other than to say [the worker's] employment had come to an end."
Labour hire and ‘employer type control’
The Authority granted the application to join the hospital as a controlling third party, finding both legal requirements were satisfied.
The Authority was "satisfied that it was arguable that [the hospital] was exercising employer type control and direction of [the worker's] day to day employment sufficient to satisfy the second limb of the definition of controlling third party."
The Authority emphasised that this occurred "in the context of a less than formal commercial arrangement and with employment that had no end date recorded in the [employment agreement] in relation to [the worker's] nominated 'temporary' status."
The decision stated: "Based on the above, the application to join [the hospital] as a 'controlling party' under s 103B of the Act is allowed."
This means the substantive personal grievance proceedings can now continue against both the labour hire company and the hospital, with the worker potentially able to claim remedies from both entities. The Authority noted that arrangements would be made to discuss continuation of the substantive matters, indicating the case will proceed to determine the merits of the underlying personal grievances.
