Workplace injuries can happen in any industry, even with strong safety systems in place. When they do occur, one of the most pressing questions is: who is legally responsible – the host employer or the labour hire company?
This issue is particularly important in Australia, where laws differ across states and territories.
In this article, our employment lawyers, delve into this complex issue by exploring a detailed case study to shed light on the key factors that influence liability in such situations.
Key takeaways
Both host employers and labour hire companies can share liability for workplace injuries, depending on contracts, insurance, and legislation.
Labour hire companies must hold workers’ compensation insurance, while host employers often rely on public liability insurance.
Indemnity clauses may not always hold up in court – in Queensland and Victoria, certain contractual indemnities are unenforceable.
Injured workers can claim against either party, sometimes involving both in litigation.
Clear agreements, safety measures, and legal advice are essential to minimise risk.
Why Workplace Injury Liability Matters
Workplace injuries affect more than just the injured worker. For businesses, unclear liability can result in:
Costly lawsuits and rising insurance premiums
Strained relationships with labour hire agencies
Reputational damage if workers feel unsafe
Lost productivity and disruption to operations
For workers, knowing who is responsible ensures they can access the right compensation quickly, without being caught in the middle of disputes between employers.
Because licensing requirements often affect whether a business is permitted to supply labour hire services legally, we also recommend reading our guide on Labour Hire Licences in Australia to ensure compliance across states more generally.
Case Study: Who Pays When a Worker Is Injured?
Let’s look at an example.
Kelly is engaged by a labour hire company but performs work at a host employer’s site. She suffers an injury while working.
Who is responsible?
The labour hire company (Kelly’s employer) pays her wages, superannuation, and entitlements. It is legally required to hold workers’ compensation insurance.
The host employer engaged Kelly through the labour hire company and is responsible for providing a safe workplace, but is not her direct employer.
Kelly may choose to claim compensation:
From her employer under workers’ compensation laws; or
From the host under civil liability laws; or
From both, depending on the circumstances.
Option 1: Worker versus labour-hire employer
Kelly’s employer covers her with workers’ compensation insurance because they have an employment relationship. Kelly makes a claim under this policy.
The workers’ compensation insurer, in order to protect its own interests and those of the insured employer, may seek indemnity from the host.
Here’s where it gets interesting.
Q: Can the host enforce its contractual indemnity against the employer in relation to the claim for indemnity made against it by the workers’ compensation insurer?
In Queensland and Victoria, the answer is no.
Workers’ compensation laws in those states make indemnities from the employer to the host unenforceable.
This was prompted by a Queensland court decision that forced WorkCover Queensland to indemnify an employer due to a contractual indemnity. As the host was not the insured under the policy, it created a significant loophole that legislation later closed.
Q: What about public liability insurance?
If the host has a public liability policy, it may have to pay an additional excess for a personal injury claim. The host may try to pursue the employer under contract. While this sits outside the workers’ compensation framework, legal and financial costs often outweigh the potential recovery.
Ultimately, in either case, both parties’ insurance premiums are likely to increase.
Option 2: Worker versus host employer
The host’s workers’ compensation insurance does not cover Kelly, as there is no employment relationship. However, since the injury happened on the host’s premises, she is likely covered by the host’s public liability insurance.
Kelly can bring a claim under the relevant civil liability act. Under these laws, proportionate liability applies:
The host is only liable to the extent it caused or contributed to the injury.
Kelly risks recovering less than her full loss if she only sues the host. For example, if the host is 70% liable, she can only recover 70% of damages.
To maximise recovery, Kelly may sue both the employer and the host.
The host, in turn, can join the employer in the proceedings to share liability.
Real-World Consequences
Disputes like Kelly’s don’t just impact legal outcomes:
Workers may face delays in receiving compensation.
Hosts and labour hire companies can become locked in lengthy disputes.
Both parties’ insurance costs rise, regardless of fault.
Reputation and trust between employers, workers, and clients may suffer.
Practical Steps for Employers
To minimise exposure, businesses should:
Maintain comprehensive insurance policies (workers’ compensation and public liability).
Draft contracts carefully, ensuring indemnity clauses comply with state laws.
Conduct regular workplace safety training and audits.
Keep open communication with labour hire partners to align responsibilities.
Seek specialist legal advice to stay compliant with evolving legislation.
When negotiating contracts and indemnity clauses, it is useful to refer to our detailed post on labour hire arrangements, contracts, and employer/host responsibilities in Legal Considerations of using Labour Hire Services in Australia.
Implications for Workers
If you are a worker engaged through a labour hire company:
You are entitled to workers’ compensation from your employer.
You may also sue the host employer if their negligence contributed.
Getting legal advice early can help you access the right compensation and avoid disputes.
Frequently Asked Questions
Who is more liable - the host employer or the labour hire company?
Both may share liability. Labour hire companies provide workers’ compensation, while host employers may be liable for unsafe conditions on their premises.
Can an injured worker sue both parties?
Yes. Workers often bring claims against both the labour hire company and the host, leading to shared liability (depending on the circumstances).
Do workplace laws differ across Australia?
Yes. For example, Queensland and Victoria prohibit enforcement of indemnities against labour hire employers in workers’ compensation cases.
The following are the various workplace injury laws in Australia:
- Queensland: Workers’ Compensation and Rehabilitation Act 2003
- Victoria: Workplace Injury Rehabilitation and Compensation Act 2013
- South Australia: Safety, Rehabilitation and Compensation Act 1988
- New South Wales: Workmen’s Compensation Act 1910
- Tasmania: Workers’ Compensation Act 1927
- Western Australia: Workers’ Compensation and Injury Management Act 1981
How can employers protect themselves?
By maintaining appropriate insurance, ensuring safe workplaces, and drafting contracts with advice from experienced employment lawyers.
How can Host Employers and Labour Hire Companies reduce liability for worker injuries?
Both a Host and an Employer can use strategies to shift liability onto each other within the boundaries of the law. Visit Contact Prosper Law, a boutique commercial law firm today to find out how.
