Monday, 15 February 2021

The FWC confirms there is no power to reinstate labour hire worker to host employer’s site

In November 2020, the Fair Work Commission (FWC) ordered labour hire company Chelgrave Contracting Australia (Chelgrave) to reinstate a labour hire employee, Mr Chaya Johnson, to his position as a maintenance fitter for its client and host employer, Carlton United Breweries (CUB). The FWC found Mr Johnson had been unfairly dismissed after his employment was terminated due to CUB directing Chelgrave to remove Mr Johnson from its work site for misconduct.

During the initial proceedings, Chelgrave failed to provide the FWC with a copy of the labour hire agreement between Chelgrave and CUB, and on that basis the FWC found that it could not make findings about what Chelgrave’s contractual obligations to CUB were, and it could not just be inferred without reviewing the contract that there was a contractual obligation to remove an employee from a worksite if instructed to do so. A more detailed summary of the facts of this decision by the FWC can be found in our previous article here.

The decision at first instance was appealed by CUB; even though CUB was not a party to the original proceeding, it was given permission to appeal as an “aggrieved party”.

After reviewing the labour hire agreement between Chelgrave and CUB, the Full Bench of the FWC overturned the original decision of the Commission, confirming that the FWC did not have the power to reinstate Mr Johnson back to his role at CUB.

FWC’s powers to order reinstatement

The Fair Work Act 2009 (Cth) provides for reinstatement to be the primary remedy to an unfair dismissal until it is found to be inappropriate.  The appropriateness of reinstatement involves an assessment of a broad range of factors, which may include circumstances where the employer no longer conducts a business into which the employee may be reappointed.  Incapacity of an employee can also arise in cases where the employee has been prohibited from entering their work site by a third-party rendering reinstatement inappropriate.

The Appeal

In CUB’s appeal before the Full Bench, it contended that the order for reinstatement would be impracticable and inappropriate because the employee was incapacitated from fulfilling his duties arising from CUB’s contractual right in the labour hire agreement between CUB and Chelgrave to have Mr Johnson excluded from its worksite.

This labour hire agreement was not placed in evidence before the FWC at first instance, however since having the benefit of reviewing the agreement, the Full Bench found it was clear that Mr Johnson was incapacitated from working at CUB’s site because Chelgrave had no contractual power to force CUB to allow access to its site after his removal, and on this ground, any order to reinstate the Respondent to CUB’s site was inappropriate in all the circumstances.

The Full Bence concluded by saying that FWC members who “find themselves dealing in circumstances where a third party to proceedings can potentially be directly affected by an order they are minded to make should, as a matter of prudence, take extreme care to ensure the orders they are contemplating are capable of being complied with.  This is especially the case given the increased incidence of labour hire contracts and working arrangements”.

The Full Bench criticised the initial decision, stating that the FWC should not have made any findings that could be in breach of contractual obligations without first making its own enquiries, compelling the parties to produce the labour hire contract, and inviting any third parties likely to be impacted by a reinstatement order to make submissions.

Lessons for Employers

Considering the developments arising from this decision by the Full Bench, employers need to be mindful that:

  1. Where a labour hire worker is dismissed at the instruction of a host employer, a determination as to whether there was a valid reason for dismissal will depend on the circumstances of the case and not simply because of the host employer’s instruction. The labour hire employer must still follow a procedurally fair process, and be satisfied that there is a valid reason for dismissal.
  2. Where a labour hire employee is dismissed following a direction of the host employer which is consistent with a contractual right of removal, serious consideration should be given to adducing such agreement in evidence.
  3. Host employers should review labour hire agreements to understand whether labour hire providers have the contractual power to force their employees access to the host’s site.
  4. Similarly, labour hire employment contracts should reflect that the employment is subject to the directions of the host employer.
  5. Although host employers may not be a party to any initial unfair dismissal proceeding, they may be granted permission to make submissions and/or appeal any unfair dismissal order if they are a person aggrieved by the decision.

Case: CUB Pty Ltd T/A Carlton & United Breweries v Chaya Johnson; Chelgrave Contracting Australia Pty Ltd  [2021] FWCFB 411


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.