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.
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
Mr Pettifer claimed that the dismissal was unfair.
The Fair Work Commission Full Bench held that Mr
Pettifer was not unfairly dismissed, noting that:
- Mr Pettifer was employed specifically by MODEC for
providing labour to BHPB;
- 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;
- There was a “valid reason for dismissal” – Mr Pettifer
no longer had capacity to undertake his employment.
- 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
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:
- Mr Pettifer was employed specifically for that site and
not generally in MODEC’s operations;
- The contract between MODEC and BHPB expressly
included a right for BHPB to direct MODEC to remove
a worker from site; and
- 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
We recommend that labour hire businesses should:
- Review their supply contracts to identify if the host
employer has the right to remove a worker from site.
- Review their employment contracts to identify if
employees are hired specifically for a site, or generally
within the labour hire business.
- 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.
- 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
If you require any assistance with the above
matters then please do not hesitate to contact our
Employment Law team