Labour hire companies can't rely on host employers' processes to dismiss an employee

By Saul Harben, Matt Condello

25 May 2017

The Full Bench of the Fair Work Commission has confirmed that labour hire companies do not have an automatic right to dismiss an employee where the host employer no longer wants the employee to work for it.

In Tasmanian Ports Corporation Pty Ltd v Gee [2017] FWCFB 1714, the Full Bench of the Fair Work Commission has given guidance on when labour hire companies can properly dismiss employees where the host employer does not want the employee to continue working for them.

Mr Gee's dismissal

Tasmanian Ports owns and operates a number of ports in Tasmania and supplies labour to privately owned ports.  Tasmanian Ports assigned Mr Gee to work for a host employer, where he worked from 2009 until the date of his dismissal.

In August 2015, the host employer informed Tasmanian Ports that it would be revoking Mr Gee's access to all its sites effective immediately.  The reasons included that Mr Gee had allegedly failed to comply with a reasonable work direction, he had posted unauthorised photos to social media, he had not complied with reporting protocols, and had been in possession of a mobile phone without prior authorisation.

The host employer informed Tasmanian Ports of the matter, who supported the decision to revoke Mr Gee's access to the sites.  The same day, Tasmanian Ports informed Mr Gee of the allegations, and Mr Gee provided a response.  Tasmanian Ports did not provide Mr Gee's response to the host employer.

The host employer subsequently provided Tasmanian Ports a summary of information obtained from an investigation it conducted (it did not approach Gee for a response).  Tasmanian Ports then dismissed Gee, reiterating the allegations, and stating that as his site access had been revoked, he was unable to perform the inherent requirements of his position and no alternative positions were available.

Mr Gee commenced proceedings in the Commission alleging unfair dismissal.  His application was successful at first instance, and Tasmanian Ports appealed to the Full Bench.

There is a difference between dismissal for conduct and dismissal for capacity

On appeal, the Full Bench noted that there is a difference between dismissal for conduct reasons and dismissal for capacity reasons.

The Full Bench said that, where a labour hire agency dismisses an employee based on misconduct allegations made by the host employer, the dismissal is better characterised as conduct-based, rather than capacity-based. 

Where a decision to dismiss an employee is for conduct reasons, the labour hire company must do more than automatically accept the views of the host employer.  The labour hire company must form an independent view about the allegations following a proper process.  

Where a decision to dismiss an employee is for capacity reasons, the labour hire company is required to look for redeployment opportunities.   This search should include discussing the matter with the employee, including by reference to their full work history, qualifications and skills.   It is only after this process has been exhausted that an employee can be dismissed for capacity-reasons.

Whether a dismissal is actually for capacity reasons (rather than conduct) will depend on the circumstances.  For example, where a host employer has an absolute right to have an employee removed from site and that employee was employed by the labour hire company solely for the purpose of working at that site, it is likely that any subsequent dismissal for that reason will be capacity-based.  However, if a host employer does not possess such a right, any subsequent dismissal without further inquiries by the labour hire company is unlikely to be capacity-based.

In this case, the Full Bench said that, as the dismissal was conduct-based and Tasmanian Ports acceded to the host employer's investigation outcome without a proper investigation of its own, the dismissal was unfair.

Can you dismiss an employee where the host employer does not want them?

The Full Bench has confirmed that a labour hire relationship cannot be used to circumvent the requirements of unfair dismissal laws. 

For dismissal relating to misconduct, it is more likely that a labour hire company's decision to dismiss an employee based on the host employer's views will be upheld where the labour hire company:

  • does not automatically accept allegations made by the host employer; and
  • conducts a proper investigation, including giving the employee an opportunity to respond and taking into account their response.

For dismissal relating to capacity, it is more likely the decision will be upheld where:

  • the host employer has a contractual right to require the labour hire company to remove the employee from site;
  • the labour hire company has searched for redeployment opportunities; and
  • no redeployment opportunities have been identified.

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