Labour hire; who is the employer?

The extract from a recent unfair dismisal case in the Fair Work Commission contains a very useful analysis of the often complex legal issues involved when determining who is the employer in a labour hire situation.

“The authorities acknowledge that as a practical reality of labour hire arrangements, the
hirer of the labour will exercise control over the work of the employee and how that work is
performed. However, this does not by itself result in the hirer of the labour becoming the
employer of that labour.22 In FP Group Pty Ltd v Tooheys Pty23 the Full Bench of the
Commission observed:
“[29] From a practical point of view, it is necessarily a fundamental feature of any
labour hire arrangement that the hirer of the labour is able to exercise a large degree of
management control over the performance of the work of the hired workers and is also
able to integrate them to a significant degree into its existing work systems. Without
this, the arrangement would become unworkable. In our experience, labour hire
arrangements almost invariably involve the hirer being able to communicate directly to
the hired worker instructions concerning the performance of work without the
interposition of the labour hire company. That, without more, cannot operate to render
the hirer the employer of the hired worker.”
[80] The plurality of the High Court took the same general view in Personnel Contracting in
the following terms:
[2023] FWC 184
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“Contrary to Construct’s submissions, and to the observations of Lee J there is nothing in
the tripartite nature of a labour-hire arrangement that precludes recognition of
Construct’s contractual right to control the provision of Mr McCourt’s labour to its
customers, and the significance of that right to the relationship between Construct and
Mr McCourt. As between Construct, Mr McCourt and Hanssen, it was only by reason
of Mr McCourt’s promise to Construct that Mr McCourt was bound to work as directed
by Hanssen.”24
[81] In Personnel Contracting, “Construct” was the labour-hire firm, “Hanssen” was the host
business where the work was performed and Mr McCourt was the worker involved. The High
Court found that Mr McCourt was an employee of Construct. In so doing, the High Court took
issue with the notion that “Odco-style” triangular labour-hire arrangements are not capable of
creating relationships of employment.25
[82] I deal firstly with whether FCS engaged the Applicants to work for it or whether Secure
Services (and/or other entities) were the party to any relationship for the Applicants to provide
the work involved.
[83] There were no written contracts between the Applicants and FCS or between the
Applicants and Secure Services. There was a Contractor Services Agreement, dated
14 February 2020, under which Secure Services would provide labour to FCS. Assuming for
present purposes that this document was legitimate, the real issue is whether this contract was
applied in practice to engage the Applicants. Although originally relied upon by the Respondent
as the basis for the arrangement for the entire period, there is no reliable suggestion that the
Applicants had any dealings with Secure Services (even in relation to payments) prior to August
2021.
[84] There is no evidence of any engagement of the Applicants by Secure Services (or any
other labour hire company) and the only evidence before the Commission points to each of the
Applicants making direct arrangements with FCS for the provision of their services.
[85] In terms of the practical arrangements for the work, there is also no evidence of any role
played by Secure Services (or any other labour hire company) in terms of the location, roles,
assignments or cessation of the Applicants’ engagements. The evidence is that FCS undertook
all of those functions directly. I will return to the significance of these events.
[86] Further, the fact that the Applicants were not party to the Contractor Services Agreement
does not of itself directly determine the nature of any relationship between the Applicants and
FCS.
[87] The weight of the evidence is that each Applicant’s TFN and Superannuation details
were provided by them to FCS as part of seeking employment and recorded within FCS’s
systems. The only available inference is that these details were supplied to the (other) “labour
hire” businesses by FCS which then utilised that information to make the payments – along
with the details of the hours worked and roles undertaken by the Applicants, which were also
provided by FCS. In the case of Secure Services, payments were made without reference to the
TFN and no taxation was deducted. However, there is no evidence to suggest that the
[2023] FWC 184
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contractual nature of any relationship between any of the relevant parties was materially
different to that which existed up until that point.
[88] By the time that the dismissals took place, payments were being made by Secure
Services for the work undertaken in the business of FCS. There is no reliable evidence that the
Applicants were required to, or did, issue invoices to any party in connection with their work
performed for FCS.
[89] In practical terms, the only role played by Service Services (or the other entities) was to
act as a payroll service. It made the payments based upon the information supplied to them by
FCS in relation to each of the Applicants in connection with the work required by and performed
for FCS. In the absence of any role in the engagement of the Applicants, I do not consider that
this payroll function means that it became the “employer” of the Applicants. There is absolutely
no evidence of any contractual elements existing between the Applicants and Secure Services
and the evidence of the Applicants, which I accept, is that were no dealings with that entity (or
any of the other relevant labour hire companies) at all – other than the payments which were
apparently deposited into their bank accounts by them without, in the case of Secure Services,
clearly identifying the source.
[90] In light of that finding and the evidence more generally about the formation and conduct
of the relationships, the obvious party for any contractual relationships with the Applicants is
FCS. However, as contended on its behalf, there are some of the elements of the normal
engagement that are missing, or at least not expressed. These include:
• The stated terms and conditions of the engagement; and
• The absence of (direct) payments (beyond the reimbursements) made to the
Applicants by FCS.
[91] In Australian Workplace Solutions Pty Ltd v P. Fox26 the Full Bench of the AIRC set
out the elements of a contract as follows:
“The elements of a contract are stated in Macken, McCarry and Sappideen’s “The Law
of Employment” (4th edition, 1997 by the Hon James Macken, Paul O’Grady and
Carolyn Sappideen) (Macken, McCarry and Sappideen), a text to which reference was
made both before Simmonds C and us, as follows (p.74):
“The law holds that before any simple contract is enforceable it must be formed
so as to contain various elements. These are:
1. There must be an ‘intention’ between the parties to create a legal
relationship, the terms of which are enforceable.
2. There must be an offer by one party and its acceptance by the other.
3. The contract must be supported by valuable consideration.
4. The parties must be legally capable of making a contract.
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5. The parties must genuinely consent to the terms of the contract.
6. The contract must not be entered into for any purpose which is illegal.”
“In relation to the first of these elements, the learned authors say (p. 74):
“The first element essential to the existence of any contract is the requirement
that the parties have a mutual intention to create a legally enforceable bargain.”
[92] The application of these principles was however further considered by the Federal Court
in Damevski v Giudice27 which observed as follows:
“82 Although contracts are not to be implied lightly, the Court may find exceptions
to the general rule concerning express intentions. The Court may imply a
contract by concluding that the parties intended to create contractual relations
after examining extrinsic evidence, including what the parties said and did: see
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Air
Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) NSWLR 309;
Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 3 All
ER 25 at 31 per Bingham LJ and Orion Insurance Co Plc v Sphere Drake
Insurance Plc [1990] 1 Lloyd’s Rep 465 at 492-4 per Hirst J.
83 Prerequisites for an enforceable contract were set out by Grainger C and are
reproduced at [40] above. However, as discussed in the relevant chapter of The
Law of Employment, which was the source for the list of prerequisites, those
elements of contract are to be applied subject to the various nuances of contract
law. In relation to the second element listed, offer and acceptance, it is pointed
out in Cheshire, Fifoot & Furmston’s Law of Contract, 14th ed, (M P Furmston),
(2001), England, Butterworths LexisNexis, at p.33 that:
“These complementary ideas present a convenient method of analysing a
situation, provided that they are not applied too literally and that the facts are not
sacrificed to phrases.”
Lord Wilberforce’s judgment in New Zealand Shipping Co Ltd v A M
Satterthwaite & Co Ltd [1975] AC 154 at 167 is quoted and reference is made
to cases where the courts have held that there is a contract despite the difficulty
or impossibility of analysing the transaction in terms of offer and acceptance.
Below the relevant passage from the decision of Lord Wilberforce in New
Zealand Shipping is set out more fully:
“It is only the precise analysis of this complex of relations into the
classical offer and acceptance, with identifiable consideration, that seems
to present difficulty, but this same difficulty exists in many situations of
daily life, e.g., sales at auction; supermarket purchases; boarding an
omnibus; purchasing a train ticket; tenders for the supply of goods; offers
of rewards; acceptance by post; warranties of authority by agents;
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manufacturers’ guarantees; gratuitous bailments; bankers’ commercial
credits. These are all examples which show that English law, having
committed itself to a rather technical and schematic doctrine of contract,
in application takes a practical approach, often at the cost of forcing the
facts to fit uneasily into the marked slots of offer, acceptance and
consideration.”28
[93] In Damevski v Giudice,
29 the Federal Court also confirmed that although intention is a
necessary ingredient in the formation of a contractual relationship, the test of intention is
objective, not subjective; and intention may be inferred from conduct.30. The High Court said
in Ermogenous v Greek Orthodox Community of SA Inc31:
“24. “It is of the essence of contract, regarded as a class of obligations, that there is a
voluntary assumption of a legally enforceable duty.” To be a legally enforceable duty
there must, of course, be identifiable parties to the arrangement, the terms of the
arrangement must be certain, and, unless recorded as a deed, there must generally be real
consideration for the agreement. Yet “[t]he circumstances may show that [the parties]
did not intend, or cannot be regarded as having intended, to subject their agreement to
the adjudication of the courts”.
25. Because the inquiry about this last aspect may take account of the subject-matter
of the agreement, the status of the parties to it, their relationship to one another, and
other surrounding circumstances, not only is there obvious difficulty in formulating
rules intended to prescribe the kinds of cases in which an intention to create contractual
relations should, or should not, be found to exist, it would be wrong to do so. Because
the search for the “intention to create contractual relations” requires an objective
assessment of the state of affairs between the parties (as distinct from the identification
of any uncommunicated subjective reservation or intention that either may harbour) the
circumstances which might properly be taken into account in deciding whether there
was the relevant intention are so varied as to preclude the formation of any prescriptive
rules. Although the word “intention” is used in this context, it is used in the same sense
as it is used in other contractual contexts. It describes what it is that would objectively
be conveyed by what was said or done, having regard to the circumstances in which
those statements and actions happened. It is not a search for the uncommunicated
subjective motives or intentions of the parties.” (references omitted)
[94] There must also be an offer by one party (the promisor) and an acceptance of that offer
by another party (the promisee).32 An offer is the expression of the promisor’s willingness to
contract on the terms as stated. Further, the promisor must be reasonably understood to be
seeking something in return for the promise. The High Court in Australian Woollen Mills Pty
Ltd v Commonwealth33 said:
“In such cases as the present, therefore, in order that a contract may be created by offer
and acceptance, it is necessary that what is alleged to be an offer should have been
intended to give rise, on the doing of the act, to an obligation.”34
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[95] The laws of contract look to the objective intention of the parties in relation to offer and
acceptance. That is, the effect of an offer is to be determined by what a reasonable person in
the position of the promisee would understand the offer to be.35
[96] A legally binding contract will usually result once the offer has been accepted by the
promisee. However, to be valid, the acceptance must be given by the promisee with the
knowledge of the offer and an intention to accept that offer. That is, the acceptance must be
“truly responsive” to the offer.36 It is clear that the laws of contract contemplate that acceptance
will not always be expressly given and may, on occasion, be implied from conduct. However,
it is important to note that a contract will not be implied lightly and the conduct must be such
that one can confidently conclude that the parties intended to create contractual relations and
the agreement was to effect contended.37
[97] The acceptance must also be unequivocal38 and generally, communicated to the
promisor.
[98] The fundamental terms of a contract must also be sufficiently certain. That is, where the
terms of a purported contract are obscure and incapable of any definite or precise meaning it
may not be possible to attribute to the parties any particular contractual intention and the
contract may be held to be void or uncertain or meaningless.39
[99] However, as Barwick C.J. said in Upper Hunter County District Council v. Australian
Chilling and Freezing Co. Ltd:
40
“But a contract of which there can be more than one possible meaning or which when
construed can produce in its application more than one result is not therefore void for
uncertainty . As long as it is capable of a meaning, it will ultimately bear that meaning
which the courts, or in an appropriate case, an arbitrator, decides is its proper
construction . . . “.
[100] It is only if it is not possible to put any definite meaning on the contract that it can be
said to be uncertain.41 That is, there is a distinction between an uncertainty of meaning, as
distinct from absence of meaning or of objective intention.
[101] Valuable consideration must also be provided. That is, a price must be paid (although it
need not be monetary) for the promise of the other party. The consideration must not be too
vague or uncertain and it must be present or future, but not past.42 The parties must also have
the legal capacity to enter into, and genuinely consent to, the making of a contract.
[102] In this case, many of the terms of any contract would need to be implied. There is no
direct evidence about the discussions between the Applicants and Mr Wall about the detailed
terms of their “engagement” in their operations roles. However, I consider that this in an
occasion where the terms (or at least sufficient to determine the existence of contract) can be
implied from the parties’ conduct.
[103] I consider that there is sufficient certainty in the arrangements to ascertain the parties’
legal intention and that the parties objectively intended that a legal contract be made. The offer
to undertake the operational roles, in particular, was made by Mr Wall on behalf of FCS to each
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of the Applicants. It would be objectively understood that they were to perform the tasks
required to undertake those roles as directed and that they were obliged to do so having accepted
the roles. It would also be reasonably understood that they would be paid for their work, which
occurred.
[104] The absence of any expressly agreed terms on matters such as position descriptions,
hours of work, whether they were weekly hired or casual employees is problematic, but at least
in the context of the workplace where industrial instruments and statutory provisions may apply
to provide that detail where applicable, these deficiencies do not in my view lead to the absence
of enforceable rights and obligations. To use the language of Damevski v Giudice,
43 the
elements of contract should not be applied too literally and the facts sacrificed to phrases.
[105] In relation to the absence of direct payments by FCS, I do not consider this to be
decisive. All of the work was performed for FCS, all of the information upon which any
payments were made was held by FCS and provided to Secure Services to make the payment,
and the fact that another entity (which was not in a contractual relationship with Applicants)
was used to actually transfer the payment, is not a sound indicator that FCS was not a party to
a relevant contract with the Applicants. Valuable consideration was provided by FCS for the
work performed for it by the Applicants.
[106] Mr Wall, on behalf of FCS, engaged the Applicants to undertake the operational roles
that they occupied when they were dismissed. The details of the work and the day-to-day
instructions and resources to undertake the work were supplied by FCS. The relationships were
directly concluded by FCS.
[107] Although in a genuine labour hire triangular relationship, the direct giving of directions
and the control that is exercised is not determinative, in this case, these elements are completely
consistent with the fact that the actual legal relationship was with FCS.
[108] Subject to the operation of a relevant statutory provisions, such as the transfer of
business arrangements,
44 a contract of employment once formed cannot just simply be assigned
to another unrelated entity without notice or consent.45 In the case of the 2 Applicants here, both
elements were missing, and it was not contended that any statutory provision applied.
[109] On balance, I consider that both of the Applicants were engaged by and worked for FCS
at the time of the alleged unfair dismissals.
[110] I turn now to the second requirement, that is whether the Applicants were employees.
[111] In 2022, the High Court of Australia in Jamsek46 and Personnel Contracting47
pronounced on the approach to be adopted under the law in determining whether, absent a
specific statutory definition or rule, a person is an employee or contractor. This also involved
the High Court reviewing past decisions of the Court and other courts. Relevantly, elements of
the past approach of the Commission (itself based on the extant court authority) as outlined in
the Full Bench decision of French Accent48 are, to a large degree, no longer to be applied.
[112] Amongst the principles that now apply, the following may be stated with some
confidence:
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• The characterisation of the relationship is to be determined by reference only to the
parties’ legal rights and obligations.
• Where a comprehensive written contract is in place, this will be the primary source
of the parties’ legal rights and obligations, and these will be decisive of the
characterisation of the relationship. This will apply unless the contract is a sham, or
has been varied after it was made, or post agreement conduct or context demonstrates
that a term is legally ineffective.49
• The conduct and expectations of the parties after entering into the contract are not
generally relevant to the assessment.50
• The manner in which the relationship is worked in practice may be relevant for
certain limited purposes, such as to find contractual terms where they cannot
otherwise be ascertained51 or to determine the nature of any variation to agreed
terms.52
• It is permissible to have regard to objective events, circumstances and things external
to the contract known to the parties at the time of contracting which assist in
identifying the purpose or object of the contract.53
• The relative bargaining power of the parties is not relevant. That is, the fact that the
arrangement was brought about by the superior bargaining power of the company
has no bearing on the meaning and effect of the contract.54
• The “multifactorial” test remains appropriate; however, it is to be applied by
reference to the parties’ legal rights and obligations not to the post contract conduct.
In that respect, the terms of contract between the parties are not merely “factors” but
are determinative.55 The manner in which the contractual terms address the mode of
remuneration, provision of equipment, obligation to work, hours of work, delegation
of work, holidays and the right to control may show that it is not an employment
contract.56
• Whilst all relevant factors require consideration, two factors in particular assist in
assessing the ultimate question of whether an applicant was an employee:
Control: The greater the degree (rights) of control exercisable by the
principal/employer over the work performed, the greater the likelihood that an
employment relationship existed.
Own business/employer’s business: The resolution of the question whether a
person engaged to work for another as an employee or an independent contractor
depends upon the extent to which, upon an analysis of the parties’ rights and
obligations under the terms of their contract, it can be shown that the person acts
in the business of, and under the control and direction of, the other.57 In this way,
one may discern a more cogent and coherent basis for the time-honoured
distinction between a contract of service and a contract for services than merely
[2023] FWC 184
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forming an impressionistic and subjective judgment or engaging in the
mechanistic counting of ticks on a multifactorial checklist’.58
• While the “own business/employer’s business” dichotomy may not be perfect or
universal (because not all contractors are entrepreneurs), it usefully focuses attention
upon those aspects of the contractual relationship which bear more directly upon
whether the worker’s work was so subordinate to the employer’s business that it can
be seen to have been performed as an employee of that business rather than as part
of an independent enterprise.59
• It is not necessary or suitable to ask whether the worker is working in their own
business. This is not a binary choice between employment or own business. The
better question is whether, by the terms of the contract, the worker is contracted to
work in the business or enterprise of the purported employer.60
• The notion of the generation of goodwill by the worker is not necessarily relevant or
decisive.61
• When assessing the significance of a relevant fact in the characterisation process, the
court (Commission) should consider the extent to which the fact bears directly or
obliquely on whether the worker is contracted to work in the employer’s business
rather than part of an independent enterprise. The more directly it bears on that issue,
the more significant it is.62
• The label applied by the parties to the contract is not decisive and does not act as a
“tie-breaker” where the multifactorial test is ambiguous. The proper characterisation
of the relationship is a matter for the courts, not the parties.63
• Non-exclusive work may be consistent with casual employment and not just
contracting. The fact that the worker was free under the contract to accept or reject
any offer of work, and not precluded from working for others, are not necessarily
contraindications of employment, since this is also commonplace for casual
employees.64
• Terminability at short notice and the absence of a guarantee of work of any direction
are not decisive given that they may also be indicative of casual employment.65
[113] More generally, I have applied the approach summarised by Wigney J in JMC Pty
Limited v Commissioner of Taxation [2022] FCA 750 at [16] to [27] and by the Full Bench of
the Commission in Deliveroo Australia Pty Ltd v Franco, Diego [2022] FWCFB 156 at [34] to
[38].
[114] There were no written contracts in which the Applicants were parties. The Commission
must therefore assess the totality of parties’ rights and obligations that may be discerned from
the conduct of the oral contracts.
66 That is, the events subsequent to the making of the oral
contracts may be considered as part of the process of identification of the terms agreed between
the parties.
[2023] FWC 184
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[115] The earlier findings about the identity of the parties to each of the contracts are also
relevant here. In particular, it is the nature of the contractual relationships in place at the time
of their cessation which is the focus of the present assessment.
[116] In this case, the following elements, discerned from the conduct of the contracts, also
point to legal rights and obligations which squarely indicate that the contracts were that of
employment:
• FCS exercised day to day control over the performance of the work and the right to
exercise that control is strongly implied by the conduct;
• The Applicants were contracted to work in the business of FCS;
• There is no indication that the Applicants could delegate the performance of their
contractual duties, beyond the delegation of work to others in the team as would be
present in any employment contract;
• There is no meaningful sense in which the Applicants were working for themselves
in the performance of their roles in the operations of FCS. This focuses attention
upon those aspects of the contractual relationship, such as in this case the nature and
extent of control, which bear directly to support the notion that the Applicants’ work
was so subordinate to the FCS’s business that the work was performed as employees
of that business rather than as part of an independent enterprise; and
• The Applicants were individually paid for the work performed not by reference to
output.
[117] There are some contrary indicators including the absence of PAYG taxation
arrangements, paid leave and superannuation. However, for reasons outlined above, these
aspects are not significant in the present context as indictors of the nature of the contractual
relationship.
[118] Although the Applicants largely worked from their home in the operations roles, and by
implication provided the rooms, desks, computers, power and lighting etc. to undertake the
roles, this is not unusual in (post) Covid-19 working arrangements and in my view is not a
decisive indicator against employment.
[119] There was no label as such applied to the arrangements by the parties, given the purely
oral form of contracts. To the extent that no PAYG taxation was deducted, this does not in my
view act as a strong indicator of the form of contract here given the facts set out earlier. This
includes the absence of any use of invoices or any common intention for the payments to be
made in the form.
[120] Having regard to the parties’ legal rights and obligations discerned from the conduct of
the parties in the absence of any written agreements, I consider on balance that both Applicants
were engaged as employees at the relevant time.
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6. Conclusions
[121] I have determined that each of the Applicants were engaged by FCS and were employees
at the time of their dismissal.
[122] As a result, I must, in effect, dismiss the Respondent’s jurisdictional objection.
[123] I will list the unfair dismissal applications for further directions with a view to the
determination of each matter. I will also raise with the parties the prospect that some further
conciliation, this time with a Member of the Commission, be conducted given the circumstances
of these matters.”

Raza and another v First Call Services [2023] FWC 184 delivered 9 May 2023 per Hampton DP