If you operate a labour hire business, you may assume that when a host client ends a placement, the worker simply returns to your available workforce until another assignment becomes available.
A recent Fair Work Commission decision demonstrates why that assumption can be dangerous.
In Nagy v ProQuest Recruitment Pty Ltd, a labour hire worker had worked exclusively for the same host business for more than eight years. When the host requested her removal from site, the labour hire provider treated the situation as the end of an assignment and advised that it would attempt to find alternative work.
The Commission found that the employment arrangements did not establish an ongoing employment relationship that continued independently of individual assignments. Instead, the contractual documents suggested that employment ended when an assignment ended. As a result, the Commission found that the worker had in fact been dismissed when the assignment was terminated.
The hidden risk for your labour hire business
Many labour hire providers invest significant time negotiating client agreements but pay less attention to the wording of their employment contracts. That can create significant risk.
If your employment contracts suggest that each assignment creates a separate employment relationship, or that employment automatically ends when an assignment ends, you may unintentionally strengthen an employee’s argument that the end of a placement amounts to a dismissal.
This risk becomes even greater if a worker has spent years working for the same host client on regular full-time hours. In those circumstances, the Fair Work Commission may look beyond the labels in your contracts and examine the practical reality of the arrangement.
Why your contract matters
A critical issue in the case was the wording of the labour hire provider’s casual employment agreement. The Commission found that the agreement operated more like a framework governing separate periods of employment rather than establishing an ongoing employment relationship.
Importantly, the agreement contained provisions stating that employment would end when an assignment ended. That wording became a significant factor in the Commission’s decision.
The lesson is straightforward. If your intention is for employment to continue after an assignment finishes, your employment contracts should clearly say so.
Contract provisions you should review
This decision is a timely reminder to review whether your employment contracts clearly address the relationship between assignments and ongoing employment.
You should review whether your employment contracts clearly address the relationship between assignments and ongoing employment. Areas commonly requiring attention include:
1. Continuity of employment
One of the most important areas is continuity of employment. If you intend for the employment relationship to continue after an assignment ends, your contracts should expressly state that the end of an assignment does not automatically terminate employment. They should also make it clear that employees may be offered future assignments with different clients, at different locations or performing different duties.
2. Assignment termination provisions
You should also review your assignment termination provisions. A common drafting mistake is treating the end of an assignment and the termination of employment as the same event. If your business intends these to be separate concepts, your contracts should clearly distinguish between them. The conclusion of a placement should not automatically result in the end of the employment relationship unless that is your intention.
For example, a clause stating that “the Employee’s employment automatically terminates upon the completion of an Assignment” may create unnecessary risk because it links the end of the placement directly to the end of employment.
A better approach may be to state that “the completion of an Assignment does not automatically terminate the Employee’s employment”, making it clear that the employment relationship can continue beyond a particular placement.
3. Redeployment and alternative assignments
Your contracts should preserve your ability to offer employees other assignments when a placement comes to an end. This may include assigning employees to different host clients, varying duties where appropriate and maintaining the employment relationship while suitable work is being identified. Clear drafting can reduce uncertainty when an assignment finishes unexpectedly.
4. Client removal requests
Finally, your employment contracts and client agreements should anticipate situations where a host client requests that a worker be removed from site. These requests are common in labour hire arrangements, but the contractual consequences are not always clear. Your documents should address what happens if a client requests a worker’s removal, whether alternative placements will be explored, the employee’s obligations regarding alternative assignments and the circumstances in which employment may ultimately come to an end.
A stronger closing section should tie the case back to a practical action item for labour hire providers rather than ending with a generic warning.
What should your labour hire business do now?
This decision is a reminder that the wording of your employment contracts can have significant consequences when an assignment comes to an end. If your contracts do not clearly distinguish between the end of an assignment and the end of employment, you may face arguments that a worker has been dismissed even where your intention was to continue the employment relationship.
Many labour hire providers rely on employment contracts that were drafted years ago or have been updated incrementally over time. As this case demonstrates, seemingly minor wording can become critical when an unfair dismissal claim is made.
Reviewing your employment contracts, assignment terms and client agreements now can help ensure they accurately reflect how your business operates and reduce the risk of unintended employment consequences when placements end.
If you operate a labour hire business and would like your employment contracts reviewed, Prosper Law’s labour hire lawyers can assess whether your contractual arrangements properly protect your business and identify any provisions that may expose you to unnecessary unfair dismissal risk.
Contact an Australian Business Lawyer Today.
Contact us for a free consultation
