Labour-hire refers to the process by which businesses employ workers in order toprovide a service to other businesses by assigning those workers to perform work for those businesses (the host business).The host business pays the labour-hirebusiness a fee for providing its employees to work for them.
There is an issue then regarding who the true employee of the hire workers is. Is it the labour hire company or the host organisation?
A recent Australian case gives some guidance.
FP Group Pty Ltd v Tooheys Pty Ltdconcerned a brewery operated by the Australian company Tooheys. Tooheys entered into a 3 yearcontract with FP group, under which FP group would supply mechanical and electrical trades services to Tooheys. This was a labour hire agreement. A further contract was entered into in 2002. That contract had a term of 3 and a half years but continued to operate after that period of time.
There was a clause in the contract saying that the workers would not be recognised as employees of Tooheys.
In 2011 Tooheys restructured their business and as a result of this they dismissed a number of FP group employees. Tooheys also terminated its contract with FP group and engaged another labour-hire company. The FP group employees lodged applicationsfor unfair dismissal. Some of the employees alleged that FP group was their employer, and others said thatTooheys was their employer.
The Fair Work Commission found that although Tooheys exercised a great deal of control over the employees, FP group was still the true employer. The Commission took a number of factors into consideration to decide this, but the most important were:
- FP group recruited the employees and entered into contracts with them.
- FP group paid the employees and made superannuation contributions on their behalf.
- FP group supplied clothes and tools to the employees.
- FP group paid for their induction and training, and provided other things such as salary entitlements and annual leave.
The Commission also noted that labour-hire arrangements may constitute sham contracting where other features suggest so. However, in this case there was nothing to suggest it was a sham, it was considered to bea genuine labour-hire arrangement. This was also because FP group had established itself as a business that was structurally independent from Tooheys. It supplied labour to other organisations, and had its own premises and own staff.
According to our unfair dismissal lawyers, the effect of this case is that genuine labour-hire agencies will be considered the true employers of workers supplied to other companies under a labour-hire arrangement, even where the hiring company exercises a large degree of control over those employees.
When labour-hire employees lodge unfair dismissal or general protections applications with the Fair Work Commission, they must be aware that the hiring company is not their true employer, it is the actual labour-hire company that is their employer.