Nick Duggal

Partner: Employment, IR & Workplace Safety

How much risk should a supplier bear?

Risk Points

• Monetary entitlements

• Work, health & safety

• Workplace conduct

• Termination

Contractual Relationship

• Is the supplier:

• an employer?

• the principal of an ABN contractor?

• the principal of a contractor engaged via a services

company?

• engaging the worker via a third party supplier?

• Remember: “the written contract is king”

Entitlements

• If the worker is an employee, entitlements will include a

pay rate and loadings consistent with any applicable

industrial award, minimum hourly rates, leave,

superannuation and notice of termination.

• The supplier bears the risk.

• A contractor can be found to be an employee.

Director, Fair Work Building Inspectorate v Linkhill Pty Ltd [2014] FCCA 1124

• In December 2013, the Federal Circuit Court ruled that Linkhill Pty

Ltd (Linkhill) had entered into sham contracting arrangements with

ten independent contractors

• The workers were initially engaged by Linkhill to undertake

renovations of properties it (and its associated entities) leased in

Melbourne’s CBD

Director, Fair Work Building Inspectorate v Linkhill Pty Ltd [2014] FCCA 1124

The following were central considerations in the Court’s findings that the workers were employees, not

independent contractors:

• the workers’ contracts did not indicate decisively against the relationship being one of

employment

• the organisation and allocation of work to the workers was consistent with an employment

relationship. For instance, Linkhill directed when, where and what work was undertaken and had

the right to suspend or dismiss workers

• while the workers provided ABNs at the commencement of their engagement, the workers

performed labour exclusively for Linkhill, and were not conducting a business of their own

• the workers performed set hours of work and were remunerated on an hourly basis, rather than

being paid on result.

• Linkhill provided the tools and materials required to perform the work

• the day to day relationship between Linkhill and the workers was considered to be consistent with

an employment relationship

• NOTE: The Court also considered the workers to be “complicit”

in these sham arrangements in order to gain tax benefits.

Despite this, the Court still made adverse findings against

Linkhill

• Linkhill was fined over $315,000

Director, Fair Work Building Inspectorate v Linkhill Pty Ltd [2014] FCCA 1124

Contractual Tips - Entitlements

• Remember: contracts with both workers and clients

should be carefully considered

• Consider:

• limitation of liability of supplier

• who is responsible for entitlements

• why the worker is a genuine contractor

• any reliance on the client in calculating rates

• “offset” clauses

Work, Health & Safety

• Employers have non-delegable duties

• Insurance premiums critical

• Practical limitations on maintaining a safe work site,

however:

• induction?

• reporting?

• site visits

Kelly v Humanis Group Limited [2014] WADC 43

• In November 2009, a labour-hire worker was working as an excavator

operator at the BHP-owned Yarrie mine when he dropped a bucket of iron

ore into a dump truck, causing it to “shake violently”, injuring the driver’s

neck and back.

• The driver, Kelly was an employee of Ngarda Mining and Civil Pty Ltd

(Ngarda)

• Kelly made a claim for damages against the labour-hire companies, Humanis

Group Ltd and TSS Recruitment Pty Ltd (Humanis/TSS), alleging that they

had failed to ensure that the labour-hire worker was adequately trained,

experienced or qualified

• Humanis/TSS argued that Ngarda had control of the work conditions at the

site and did not owe a duty of care to Kelly

Kelly v Humanis Group Limited [2014] WADC 43

• The District Court held that Ngarda had a non-delegable duty of care to Kelly, had

control of the risk of injury and safety and assumed responsibility for preventing

injury to Kelly, not Humanis/TSS.

• In coming to this decision, it took into consideration that:

− “An employer ordinarily will be responsible for the negligence of an

employee. However where an employee has been hired or borrowed the

person who hires or borrows may become the de facto employer and liable

for the employee's negligence. The extent of control transferred will

determine where responsibility lies.”

− Factors identified as relevant to its findings included:

– the selection method

– the manner of payment

– the duration of the employment

– the power of dismissal

– the length of the service

– induction and training

– whether equipment or machinery was supplied as well as the employee

Workplace Conduct

• Contingent worker work alongside direct employees, and

can be the victims or perpetrators of:

• workplace bullying

• sexual harassment

• discrimination

• unsafe work practices

• defective services which incur loss

• Emden Recruitment Pty Ltd lent on hire a worker to perform welding duties for SITA

Australia Pty Ltd

• Performing work on the hopper of a baling machine and the worker became caught

in the machine, sustaining serious injuries resulting in amputation of both his legs and

a hand

• The worker was not trained in the operation of the baler and sought to isolate the

machine using a trial and error process

• The supervisor of the host employer was also not familiar with the operation of the

baler and relied on the advice of a contractor responsible for its upkeep

• The host had an isolation and tag out procedure which was not followed and the

worker was not trained in this procedure

• Emden was prosecuted pursuant to s.8(1) of the Occupational Health and Safety Act

2000(OHS Act), which has not been superseded by the WHS Act.

• The host was prosecuted pursuant to s.8(2) of the OHS Act and the supervisor was

prosecuted pursuant to s.20(1) of the OHS Act. All defendants pleaded guilty to the

charges

Inspector McGrath v Edmen Recruitment Pty Ltd [2012] NSWIRComm 108

Inspector McGrath v Edmen Recruitment Pty Ltd [2012] NSWIRComm 108

• The Court found that Emden failed to ensure the health and safety of the worker

whilst on assignment at the host employer. In particular, it found that there was a

failure to ensure it was aware of duties required to be performed by the worker and

any changes to those duties

• It was held that Emden failed to comply with its own procedures to ensure that it was

aware of the work that was being performed at the host employer’s site. Emden was

criticised by the Court because its risk assessments merely covered general site safety

and did not touch upon the specific work that was being undertaken by its employees

• Emden argued that even if they had conducted a risk assessment that included the

changes to the worker’s role and his work on the baler they would have relied on the

advice of the host employer’s site manager that the baler could not operate

• The Court however found that if Emden had undertaken an assessment it would have

come to their attention that if the isolation procedures were followed, a tag out would

have addressed the energy points that allowed the baler to operate

• Emden was convicted and fined $117,500

Lessons from Emden Recruitment

• Inductions for contingent workers must reinforce safety issues and

ensure workers are aware of the steps they need to take if a host

employer reassigns their duties

• Ensure that workers receive a site specific induction that is more

than a superficial walk through the host employer’s site

• Make regular visits to the host employer’s place of business and

develop a thorough understanding of how the site operates

• Ensure adequate risk assessments are in place for each task to be

performed

• Develop and maintain systems for communicating with employees

• Develop and maintain systems for communication with the host

employer

Contractual Tips

• Record obligations of supplier to maintain safe place of

work

• Record that workers have adequate induction and

training

• Obtain certificates of currency, check right quantity of

cover

• Ensure workers trained on eo policies

• Act on any notification

Contractual Tips

• Create obligations on end user to induct worker on

acceptable workplace practices

• Alternatively, publish a suite of policies governing

workplace behaviour

• Create contractual obligations on workers regarding

their behaviour

• Limit liability regarding defective services

Termination

• Employees have numerous claims as their disposal on

termination, including unfair dismissal, adverse action,

discrimination, breach of contract, underpayment or

sham contractor

• Termination will often trigger claims for other

entitlements including back pay or complaints to the

ombudsman/ATO

• Require end user to communicate with supplier prior to

termination

• Have a clear termination clause, provide for that

arrangement in supplier contract

• Monitor duration of engagement

Ideal supplier risk profile?

Entitlements

Termination

Workplace conduct

Work, health & safety

Contact us

Nick Duggal

Partner, Employment, IR &

Workplace Safety

Nicholas_Duggal@tresscox.com.au

(03) 9602 9744

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