FWC says no to more than one boss!

FWC says no to more than one boss!

Independent contractors, those visiting temporarily on secondment, labour hire workers and other ‘non-standard’ workers have no doubt become as prevalent as casual, part-time and full-time employees in modern Australian workplaces. However, while their engagement can help businesses to become more flexible and efficient, legal risks can and often arise.

With a focus on the recent decision of the FWC, this article look at the status of the doctrine of joint employment in Australia in the context of labour hire arrangements.

So what is labour hire?

Labour hire refers to an arrangement whereby an organisation (‘the labour hire agency’) recruits and places workers (be they casuals, part or full-time, temporary or permanent) in another business (‘the host employer’ or ‘client’).

With the rise of enterprise bargaining and the trend towards outsourcing, such arrangements are becoming more prevalent and affecting a wider range of industries, from mining and manufacturing to communications and business services.

Labour hire is advantageous as it allows the host employer or client to supplement their existing staff base in peak periods or in cases of staff illness or leave. It can also give them access to workers with more specialist skills for short periods and often at a reduced cost. In exchange, the worker benefits from more flexible work hours leading to better work-life balance, the opportunity to multi-skill, superior pay and if they choose, a pathway to full-time employment.

With those benefits however comes legal risk. This stems primarily from an unclear delineation of responsibility. It is often argued that the labour hire arrangement weakens the employment relationship and the entitlements and protections it offers, particularly in respect of occupational health and safety.

What is joint employment and why argue it?

Joint employment is where more than one entity has responsible for and obligations towards a single employee. As you will see below, the status of joint employment in Australia is unclear with courts persistently maintaining that it can and should only exist in rare circumstances.

The position in the UK is similarly uncertain. For example, Lord Justice Mummery in Brooke Street Bureau (UK) Ltd v Dacas [2004] in deciding whether a cleaner claiming unfair dismissal was an employee of an employment agency held that ‘recent cases…demonstrate that there is confusion in the workplace and considerable uncertainty in the law about the status of individuals who obtain work through employment agencies.’ In that case, a cleaner worked full-time for five years for a council. The labour hire business with whom it was alleged she shared an independent contractor relationship stopped giving her work at the council due to complaints. The court refused to find a joint employment relationship existed between her, the council and the labour hire business.

By contrast, it is a recognised doctrine in the US and is deemed to occur in circumstances where more than one employer shares or co-determines matters relating to essential terms and conditions of employment such as the power to supervise work, approve leave, hire, fire and discipline employees.

Joint employment is often sought by workers, usually independent contractors or those engaged under labour hire arrangements seeking to achieve joint and several liability for accrued entitlements in instances of insolvency. It most frequently arises in claims for unfair dismissal as it did in FP Group Pty Ltd v Tooheys Pty Ltd [2013] FWCFB 9605. Here, Toohey Pty Ltd (Tooheys) which owns a brewing site in Lidcombe, NSW employed its own electrical tradespeople until 1991 when, as a means of avoiding union-endorsed work practices and low productivity, it proposed that a new company Feyman Pty Ltd (Feyman) be set up (with financial assistance from Tooheys and with help from an Electrical Trade Union delegate) to provide labour. Once Feyman was established, Tooheys made their electrical tradespeople redundant. They commenced work at the site the very next day, this time as employees of Feyman, who had entered into a labour supply contract with Tooheys. In 1994, following a further restructure at the brewery, another company (which then replaced Feyman) called FP Group Pty Ltd (FP) was established to supply various workers to Tooheys. Following some disagreement with FP, Tooheys sought new tenders for labour supply companies. FP lost the tender and ten workers were not re-engaged (applicants). The applicants each brought two unfair dismissal applications against Tooheys and FP. FP and Tooheys made jurisdictional objections, each arguing the other employed the applicants.

Deputy President Sams decided that FP was the employer of the applicants at the time of their dismissal. He considered the entire relationship and observing how:

• FP had entered into enterprise agreements covering the workers it supplied to Tooheys.
• FP was responsible for recruitment and selection of workers, their training and induction and rostering.
• FP was responsible for wages and leave entitlements.
• FP was responsible for performance appraisals, disciplining, counselling and dismissing workers.
• FP gave its workers clothing with FP logo.
• FP continued to employ the applicants after they ceased work at the Tooheys brewery.
• FP and the worker entered into a contract of employment

 
FP appealed arguing that Tooheys was the true employer (if not a joint employer) and that Tooheys engaged FP as its agent as part of a sham arrangement. The Full Bench dismissed the appeal and reiterated the view that the interposition of a labour hire agency does not automatically produce an employee-employer relationship between worker and client. They cited Fair Work Ombudsman v Ramsey Foot Processing Pty Ltd (2001) 198 FCR 174 where it was held that ‘…arrangements whereby labour is provided by one company to another without the recipient becoming thereby an employer are longstanding and unremarkable’ and that while ‘there is no doubt that sometimes such arrangements reflect a desire by the proprietors of a business to avoid liability for employment related obligations…that is not illegal as an objective.’ They too looked at how FP had recruited and entered into employment agreements with the workers, paying them wages and superannuation, giving them leave entitlements, supplying with them clothing and tools. They noted that FP was ‘legally and structurally independent of Tooheys,’ supplying workers to other businesses and having its own premises and administrative staff.

They were also reluctant to develop the doctrine of joint employment as that would ‘involve a considerable development of the common law’, stating that the concept ‘raises other more difficult and complex questions’ and that ‘it would be prudent for the Commission to proceed with extreme caution before adopting the concept to a particular set of circumstances’ in the absence of ‘clear statutory or judicial guidance.’ Importantly, there was neither an express or implied contract between Tooheys and the applicants.

The case illustrates that businesses who engage labour hire workers should ensure, particularly if they are looking to reduce their liability for any tortious, contractual or statutory breaches by those workers, that:

• labour hire agencies are independent and engaged on an ‘arm’s length’ basis and ensure they are not related companies;
• decisions about who to employ rest with the labour hire agency and not the client;
• wages are negotiated between the labour hire agency and the worker directly;
• responsibility for discipline and reward systems lies with the labour hire agency;
• communication and consultation occurs between the worker and the labour hire agency primarily;
• any leave requests and entitlements are dealt with by the labour hire agency and long-term benefits (such as use of gym and other facilities) are reserved for employees of the client or host employer; and
• training is instigated and undertaken by the labour hire agency.

 
If you have any queries regarding this case or labour hire arrangements, please feel free to contact Michael Bishop of our office on 03 9614 7707.

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