Labour Hire Arrangements

According to the Australian Bureau of Statistics, 2.3% of all employed people in Australia work in labour supply services. While this is a relatively small percentage of the workforce, it is a growing market in Australia. Employers often look favourably on labour hire arrangements because they simplify administration and limit the risks associated with taking on a new employee. However, labour hire is not without legal complications. This article looks at the legal implications of labour hire arrangements in Australia.

What is a labour hire firm?

A labour-hire firm provides workers directly to client companies to perform services, on a fixed rate for a given period of time. The client pays the labour hire firm for the services, and the labour hire firm is responsible for paying the worker who provided the services to the client.

All labour hire firms must be legally licensed to operate. The Supreme Court of Victoria recently fined an unlicensed labour hire firm over $600,000, the highest penalty in Australian history for breaching labour hire law. In 2023, the A L Star Express Pty Ltd was found to have repeatedly and knowingly contravened the Labour Hire Licensing Act 2018, by supplying labour hire workers to horticulture businesses without a labour hire licence. The court found the company’s contraventions were serious, so the penalty must be sufficient to dissuade other companies from seeing the fine as a cost of doing business.

The important characteristic of a labour hire arrangement is that the worker is not the client company’s employee. The client company can thus benefit from the employee’s services without incurring the responsibilities of an employer. Numerous cases before the Australian courts have confirmed that there is no employee-employer relationship between the client company and the worker in a true labour hire scenario. These decisions have relied particularly upon the fact that it is the labour hire firm that appoints the worker and negotiates salary with them.

However, it is important to note that the worker may actually be an employee of the labour hire firm. Whether they are or not depends on the entirety of the relationship between the firm and the worker.

Liability

The questions about employee-employer relationships become particularly pertinent when it comes to legal responsibility for any injuries that the worker sustains during the labour hire. It is important to note that though the client firm is not the employer, it still has a duty of care towards the worker because it exercises control over the workplace. Client firms have a responsibility to create a safe workplace for anyone on the premises. 

Common law has established that labour hire agencies have responsibility for the wellbeing of labour hire workers under the Work Health and Safety Act 2011. While labour hire agencies typically have no direct management or control of the workplace, they still have a legal duty to monitor the safety of the client’s workplace and work practices. In the case of Hodge v CSR Ltd [2010], the New South Wales Supreme Court reaffirmed the non-delegable duty of labour hire companies to employees. The worker brought a negligence claim against both the client company where he was working (CSR) and the labour hire company that was his direct employer. The court held that both CSR and the labour hire company were liable in negligence for the damages to the worker.

In that case, the worker was injured when he was instructed to remove solidified concrete from a truck’s concrete barrel. Normally the workplace would provide a jackhammer weighing less than 15kg for such a task, but because the tool had recently been stolen, the company hired a jackhammer that weighed 25kg. The worker claimed that using this heavier jackhammer to excavate concrete for a full day caused injuries to his cervical spine.

The court confirmed that while the client company was not the employer, it still breached its duty to provide a safe environment and safe work practices. The court also found that even though the labour hire company had no direct involvement in the incident, it had a non-delegable duty as the worker’s employer to provide a safe workplace. It is notable, however, that the labour hire firm made a cross claim against the client. The court found that the injury was caused by CSR’s negligence, and the labour hire firm was therefore entitled to recover an indemnity for all payments made to, for, or on behalf of the worker.

Protected rate of pay

There have been recent changes to labour hire laws. Under these changes, labour hire employees (as well as unions and host employers) can now apply to the Fair Work Commission for a “regulated” labour hire arrangement order. This order would mandate that the employee receive a “protected rate of pay” that is no less than the salary the employee would receive if they worked directly for the host company. 

Go To Court Lawyers can answer any questions you have about labour hire arrangements. Please contact our employment law team on 1300 636 846 for assistance.