The following is an extract from an unfair dismissal case and is a reasonably good explanation (as a starting point) of the labour hire arrangement from an unfair dismissal and fair work perspective, by the Fair Work Commission.
“The business model of labour hire companies is generally that they employ persons (usually on a casual basis), and place those persons in the businesses of other companies with which the labour hire company has a contractual relationship (host employers). In some cases the labour hire employees will work intermittently or for specific periods of time at the premises of the host employer – for example to replace the employee of a host employer temporarily absent from the workplace for a specified period, which is ascertained in advance of the placement or which may be extended or terminated during the period of the placement if circumstances change. The labour hire employee may have been required by the host employer to meet a seasonal or operational fluctuation. In other cases, labour hire employees may be required to work at the host employer’s premises for lengthy periods; under the supervision and management of the host employer; integrating with the employees of the host employer; and for all intents and purposes forming part of the host employer’s workforce.
The diversity of such arrangements is considerable, reflecting the need for flexibility in modern workplaces. However, these arrangements can be a minefield for all concerned, both in practical terms and in terms of rights and obligations arising under legislation, industrial instruments and contracts of employment. The actions of a host employer – particularly when its managers and supervisors engage in disciplinary action against labour hire employees – can have a direct and fundamental impact on the rights and obligations, as between the labour hire company and its employees.
Where a labour hire employee is placed with a host employer and the labour hire employee is engaged on arrangements such as those outlined in Adecco’s Candidate Declaration, the end of the placement will generally not constitute dismissal of the labour hire employee so that the labour hire employee could make an application for an unfair dismissal remedy. This is particularly so where the host employer decides that it no longer requires the services of the labour hire employee and there is no indication that this decision is based on the conduct, capacity or performance of the employee. In such cases the labour hire employee is removed in accordance with the contractual relationship between the labour hire company and the host employer and as provided for in the contract of employment between the labour hire company and the labour hire employee.
Where managers of a host employer inform a labour hire employee that he or she is to be removed from site on the basis of conduct, capacity or work performance, the actions of the host employer may be tantamount to dismissal. This is particularly so where managers or supervisors of the host employer have also been involved in disciplining the labour hire employee. A labour hire employee seeking to contest such action by making an application for an unfair dismissal remedy, faces considerable difficulty, principally because the host employer is not the employer of the labour hire employee. It is also the case that a labour hire company may face considerable difficulty preventing a host employer from taking disciplinary action against an employee of the labour hire company.
However, the contractual relationship between a labour hire company and a host employer cannot be used to defeat the rights of a dismissed employee seeking a remedy for unfair dismissal. Labour hire companies cannot use such relationships to abrogate their responsibilities to treat employees fairly. If actions and their consequences for an employee would be found to be unfair if carried out by the labour hire company directly, they do not automatically cease to be unfair because they are carried out by a third party to the employment relationship. If the Commission considers that a dismissal is unfair in all of the circumstances, it can be no defence that the employer was complying with the direction of another entity in effecting the dismissal. To hold otherwise would effectively allow labour hire employers to contract out of legislative provisions dealing with unfair dismissal.”
Kool v Adecco Industrial Pty Ltd T/A Adecco (2016) FWC 925 delivered 17 February 2016 per Asbury DP