TODAY’S fluid and reactive work environments dictate the way in which businesses engage staff. Such relationships can range from full-time employment, to casual employment or labour hire arrangements. Sub-contracting is especially common in the freight forwarding sector where owner drivers provide their own vehicles and meet the vehicle’s running costs and invoice the forwarder for the work actually done.

This article examines some recent cases which have examined the duties of a host employer in labour hire arrangements and casual working relationships where despite the terminology used by a company and worker to define that relationship the worker, is not in fact a casual employee.

Labour hire
The traditional employer/employer relationship brings with it among other things, an employee’s entitlement to leave loadings, sick leave and long service leave. Labour hire arrangements can present an attractive alternative for businesses as it allows the workforce to be increased or decreased according to the demands of the business. While that may mean paying an increased hourly rate, it is without the ongoing commitments that go with permanent employment. However, reliance on labour hire employees does not dilute the overriding responsibility the employer has for the safety of the workplace and all those who work in it including labour hire employees.

What are the duties of a host employer?
An analysis of an employer’s duty of care beyond its employers was recently analysed by the NSW Court of Appeal in Williams v Metcash Trading Ltd.  The facts of that case were that Mr Williams was employed by a labour hire company Workforce Solutions Pty Ltd, which traded as Tru Blue Recruitment Australia. He was assigned to work at Metcash’s distribution centre at Eastern Creek, Sydney. Metcash supplies goods to IGA stores and “pickers” were expected to meet certain performance targets. The centre had 46 aisles with shelves up to a height of eleven metres. Mr Williams claimed to have been injured on two occasions in 2012, one of these when he was lifting two boxes of dog food from underneath a high rack.

At the first hearing, Mr Williams failed in his claim as the Court held his injury was not caused by the mechanism of removing dog food tins from the rack but rather because he had lifted two boxes of dog food at once contrary to instructions. On this basis Metcash was held not liable. However, on appeal ultimately it was found it was the height of the pick slot which caused Mr Williams his injuries, not the fact that he lifted two boxes rather than one box.

Safe handling instructions
There was evidence Workforce had given Mr Williams some instructions and an induction about safe manual handling as part of an induction process before attending Metcash’s premises. Then again, at Metcash premises, he was taken through safe handling techniques which included the importance of lifting one box at a time. There was also evidence Metcash supervisors prevented staff from carrying extra items in order to increase their picking rates.

Importantly in examining Metcash’s role, the NSW Court of Appeal held that as “host employer” it owed Mr Williams “a duty corresponding with or at least very similar to an employer’s duty to take reasonable care to avoid exposing the worker to unnecessary risks of injury”.  In addition, the Court of Appeal stated that if there is a real risk of injury, then the host employer has a duty to devise a work method that eliminates risk or provides appropriate safeguards to eliminate such risk.  In this case there was a sophisticated computerised product rotation in the picking section which provided such a safeguard.

A host employer’s duty
The duty of a host employer towards a labour hire employee is put as high as a duty corresponding with that of an employer or a duty very similar to an employer’s duty. In a practical sense, this arises from the fact the host employer is in control of the workplace rather than the actual employer and is, therefore, better placed to observe and put into place measures to avoid the risk of injury.

In terms of risk management, host employers should ensure that labour hire employees:

  • have been vetted by the employer and certified medically fit for the anticipated work or any pre-existing injuries declared;
  • provide the appropriate certifications and qualifications;
  • undergo induction and training from host employer before working on site;
  • undergo and document training given by the employer specific to the worksite;
  • in the event of an incident where a worker is injured, obtain contemporaneous statements from all relevant staff including other labour hire staff as they may not be located subsequently;
  • retain copies of any CCTV footage showing the incident; and
  • learn from the incident and implement measures which would avoid such an incident occurring in the future.

We have looked at a situation where a business uses the services of a worker without having them on their payroll but is nonetheless effectively considered an employer. However, other issues can arise in a situation where an employer tries to meet the ups and downs of the business by hiring casual rather than permanent labour and paying the higher weekly rates that usually come with such an arrangement.

When is a casual worker not a casual worker?
In Workpac v Skene the Federal Court was asked to decide in what the circumstances a “casual worker” will be deemed to be otherwise. Mr Skene worked at a mine owned by Rio Tinto in Queensland. He was classified as a ‘casual employee’ in his contract of employment and his total hourly rate of pay was stated to be inclusive of a ‘casual loading’. His employment was terminated in April 2012. With the assistance of his Union, Mr Skene issued proceedings to recover unpaid annual leave entitlements under the Fair Work Act 2009 (Cth) following the termination of his employment.  A casual worker would not ordinarily be entitled to these payments. The Federal Court found that Mr Skene was a permanent employee and was, therefore, entitled to annual leave entitlements. Key to the decision was that Mr Skene had a predictable work pattern and had been provided with an advanced commitment of 12 months’ work.

Observations by the Full Court
The Full Court observed that it may have been possible for WorkPac to offset the casual loading payments made against the liability to Mr Skene if the casual loading payments had been specifically identified as a financial sum or percentage of pay in Mr Skene’s payslips or other contractual documents. On the facts, however, no specific identification had been made and Mr Skene was entitled to compensation despite being paid casual loading during his employment. The decision has clear financial implications for businesses who employ casual workers.

Since the decision in Skene, WorkPac has commenced proceedings in the Federal Court as a ‘test case’ in WorkPac v Rossato.  The case was heard by the Federal Court in May this year and judgment has been reserved. The Federal government also had its concerns and reacted by enacting the Fair Work Amendment (Casual Loading Offset) Regulations 2018 on 18 December 2018.  The Regulations provide that where an employer classifies a worker as a casual and pays a clearly identifiable amount of money in compensation for the employee not qualifying for a casual loading entitlement under the Fair Work Act 2009 (Cth), and it is found that the person was in fact a permanent employee (as in Skene) and a claim for NES entitlements is made by the worker, the employer can seek to have the amounts paid as casual loading taken into account.

Final thoughts
Depending on the outcome of the decision in the Rossato test case, it would be worthwhile for businesses that employ staff on a casual basis to review current employment contracts to identify an employee’s loading entitlements. For labour hire workers, this is not an issue, however, a business in this situation must be continually alive to the considerable obligations it has to ensure the safety of workers while both on and off site.

* Alexis Cahalan is a partner at Norton White

This article appeared in the January 2020 edition of DCN Magazine