Thinking | 27 September 2016

Dismissal of labour hire employee due to lack of capacity

In any unfair dismissal matter, the Fair Work Commission must consider whether or not there was a valid reason for termination based on the dismissed employee’s capacity or conduct.

In Pettifer v MODEC Management Services Pty Ltd 1, a Full Bench of the Commission found on appeal that a labour hire employee was validly dismissed for lack of capacity to perform his role, where the host employer had exercised its contractual right to have the labour hire employer remove the employee from the workplace.

The brief facts of the matter are that:

  • MODEC Management Services Pty Ltd (MODEC), a labour hire company, was providing labour to BHP Billiton Petroleum Inc (Company) at its Pyrenes Venture (PV Site) in accordance with a labour hire agreement.
  • Under the labour hire agreement the Company could require a MODEC employee to be removed from the PV Site.
  • On 30 October 2015, Mr Pettifer (a MODEC employee) was involved in a near-miss incident. As a result the Company required MODEC to permanently remove Mr Pettifer from the site.
  • MODEC was contractually bound to accede to the Company’s request, although it did not consider the incident warranted the action required by the Company.
  • Mr Pettifer was subsequently dismissed by MODEC after it was unable to find alternative employment for him elsewhere in its operations.

At first instance, the Commission held that the dismissal was not unfair.  In reaching this decision, the Commissioner took the view that that the dismissal was due to the Company’s contractual right to direct MODEC to remove employees from the site, and not his capacity or conduct. The Commissioner found that therefore, there was no question of a valid reason based on the employee’s capacity or conduct.

The Full Bench granted permission to appeal due to the questions raised about the obligations of labour hire employers.

In determining the appeal, the Full Bench rejected the Commissioner’s characterisation of the reason for the employee’s dismissal, but ultimately agreed with the Commissioner’s conclusion that the dismissal was not unfair.

The Full Bench held that the employee was no longer capable of performing an inherent function of his role after the Company directed MODEC to permanently remove him from the PV Site.  The Full Bench concluded that MODEC therefore had a valid reason for dismissal relating to Mr Pettifer’s capacity.  In addition, MODEC had considered opportunities for redeployment but found none, notified Mr Pettifer of the reason for his dismissal and provided him with an opportunity to respond to the proposed reasons for his dismissal.

The decision establishes that in appropriate circumstances a labour hire employer’s contractual arrangements with a host employer can be a basis for establishing a valid reason to dismiss an employee. However, the decision cannot be taken as establishing that is all that is required. The Full Bench does not over-rule previous authority (Kool v Adecco Industrial Pty Ltd T/A Adecco ) that notwithstanding contractual arrangements, a labour hire employer must still fulfil its own responsibilities to deal with its employees fairly.

1 [2016] FWCFB 5243

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