Termination by labour hire after placement terminated the contract held not to be unfair

The Fair Work Commission (the Commission) recently found that a labour hire employer did not unfairly dismiss an employee when its principal (the host employer) advised the labour hire employer it no longer wanted the services of the employee at their site.

Background

The facts are straight forward and uncontroversial. The employee was involved in a near miss incident and as a result, the host employer exercised its rights under the contract with the labour hire employer to not have that employee return to their premises. The labour hire employer did not investigate the incident and indeed had the view that the incident did not warrant the response of the host employer. Nevertheless, the labour hire employer agreed to remove the employee from the site and endeavoured to find an alternative placement for the employee but none was available. As a result, the employee's position was terminated.

At first instance

The employee filed an unfair dismissal application. At first instance, the Commission found that the dismissal was not unfair as the dismissal did not relate to the employee's conduct or capacity.  The employee therefore, did not pas the first step, whether there was a valid reason for the termination. 

On appeal

On appeal the Full Bench of the Commission (the Full Bench) agreed with the conclusion at first instance but not the reasoning.  The Full Bench found that the dismissal related to employee's capacity as the employee was employed by the labour hire employer to specifically work at the host employer. As a result of the host employer's direction, the employee did not have capacity to undertake the duties. Consequently, there was a valid reason for dismissal. The Full Bench also took into consideration the fact that the labour hire employer tried to find alternative placements for the employee and the contract which enabled the host employer to give the direction was in evidence. The Full Bench likened these circumstances to situations where an employee loses their job because they lose their licence or security clearance that is issued by a third party. In the circumstances the dismissal was not unfair.

Lessons

This case sets a precedent for labour hire companies to be able to fairly terminate an employee who is no longer wanted by the host employer, provided that the labour hire genuinely seeks alternative placements for that employee and the contract which gives the host employer that right is put into evidence. 

If you would like to know more about this case or labour hire arrangements generally, please contact National Workplace Lawyers on  +61 2 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.