Labour hire businesses face a dilemma when the relationship between the labour hire business’s worker and host employer breaks down to the extent that the host employer demands that the worker is removed from site, or even revokes the permission for that worker to attend at the site.

In the absence of an alternative host employer for the worker, can the labour hire business proceed to terminate the worker’s employment?

This is the question that the Fair Work Commission Full Bench recently had to consider and held that the labour hire business fairly terminated the employment of its worker.

The Facts
The worker, Mr Pettifer was employed by labour hire company MODEC Management Services Pty Ltd (MODEC) which placed Mr Pettifer with BHP Billiton Petroleum Inc. (BHPB).

MODEC and BHPB entered into a contract by which MODEC provided labour for work at BHPB’s floating production, storage and offloading vessel (site).
Mr Pettifer worked at the site without incident from 2009 until 30 October, 2015 when he was involved in what BHPB called a “near miss” safety incident.

As a result of the incident BHPB exercised its right under its contract with MODEC to direct MODEC to remove Mr Pettifer from the BHPB site and MODEC was contractually required to remove Mr Pettifer from the site.

After removing Mr Pettifer from the BHPB site, MODEC reviewed whether it had alternative work at its other operations for Mr Pettifer, but no other positions were available. MODEC then terminated Mr Pettifer’s employment.

Mr Pettifer claimed that the dismissal was unfair.
The Fair Work Commission Full Bench held that Mr Pettifer was not unfairly dismissed, noting that:

  1. Mr Pettifer was employed specifically by MODEC for providing labour to BHPB;
  2. Being excluded from BHPB’s site went to Mr Pettifer’s capacity to perform the role for which he had been employed and so the termination was for a capacity reason, not a performance reason;
  3. There was a “valid reason for dismissal” – Mr Pettifer no longer had capacity to undertake his employment.
  4. Given that MODEC genuinely attempted to re-deploy Mr Pettifer elsewhere, none of the other considerations by which the fairness of a dismissal is assessed supported a conclusion that the dismissal was unfair.

Implications for Labour Hire Businesses
Although the decision clarifies that a decision by a host employer to withdraw permission for a labour hire worker to attend its workplace, goes to the worker’s capacity to work, it does not give carte blanche for labour hire businesses to automatically dismiss its employees.
Some of the important features of this case that supported the fairness of the dismissal on capacity grounds were:

  1. Mr Pettifer was employed specifically for that site and not generally in MODEC’s operations;
  2. The contract between MODEC and BHPB expressly included a right for BHPB to direct MODEC to remove a worker from site; and
  3. The dismissal was solely due to Mr Pettifer lack of capacity to perform the work at the BHPB site and not for performance reasons connected with the near miss.

We recommend that labour hire businesses should:

  1. Review their supply contracts to identify if the host employer has the right to remove a worker from site.
  2. Review their employment contracts to identify if employees are hired specifically for a site, or generally within the labour hire business.
  3. Take reasonable efforts to consider re-deployment options for a worker removed from a site, if the labour company does not think that the performance issues justify a dismissal.
  4. If the real reason for a potential dismissal is a lack of capacity to perform work at site, ensure that this is properly reflected throughout the termination management records.

If you require any assistance with the above matters then please do not hesitate to contact our Employment Law team.