How to handle dismissals when there’s an employer and recruitment agency

Maybe it was a case of crossed wires, but a recent decision by the Fair Work Commission (FWC) shows how important it is for recruitment agencies to communicate clearly with short-term workers.

The case involved a worker who disagreed with the recruitment agency about the date of his last day at a host employer.

It might sound like a trivial misunderstanding, but the FWC argued that under the Fair Work Act, the key factor in determining dismissal was whether the employer initiated the termination without the worker’s agreement.

Because the worker had not been dismissed by the rules, the FWC issued a certificate allowing him to pursue further legal action if he chose to do so.

Rules around dismissal of casual workers

The case is another reminder to HR teams to understand the precise status of a relationship between employer and worker, said King & Wood Mallesons partner Angela Weber.

“The case has many more lessons for the employer, being the recruitment agency, than the host,” Weber said.

It is essential that a recruitment agency understands the precise status of the relationship it has with its employees on the basis of particular placements with particular clients, she said, “and how that relationship is managed and how it can be lawfully brought to an end”.

It is a mistake to assume that the casual nature of the employment could mean the reasons for the dismissal are not liable to be interrogated or the subject of a general protections claim, Weber said.

“Casual employment is different to permanent ongoing employment, but nonetheless the [Fair Work Act] still extends certain protections to casual employees, provided what’s occurred meets the legal definition of a dismissal under the act,” she said.

Recruiters’ contract with host employers

Recruitment agencies and labour hire firms are prone to risk if they gloss over the technicalities of the legal relationship with employees, regardless of whether they are full-time, fixed-term or casual.

“They need to administer the relationship in a way that has regard to those protections and to those rights,” Weber said.

A short-term recruiter should be in no doubt that they have the legal relationship of employment with workers, not the host employer – even though the agency acts entirely at the direction of the host.

“It is the agency that is required to effect termination in a way that’s lawful,” she said. “That’s where these types of cases go wrong and can end up in the Fair Work Commission.”

Labour hire agreements in focus

Weber stressed the importance of clarity in contractual arrangements between the host and the agency, as to how the engagement of the workers will operate in practice and who is responsible for what.

“That’s very much in the interest of the host employer as well, because that entity should be careful to ensure it is dealing with its contractual counterparty, which is the agency,” she said. “It may be undertaking day-to-day supervision of workers supplied to work in its business, but it shouldn’t be administering employment decisions in respect of those workers.”

When it comes to disciplinary issues, the host should understand it is the agency as legal employer that is responsible for any decisions or action, as distinct from day-to-day supervision of work, she said.

Under the Fair Work Act, there are certain circumstances in which a general protections claim could be made against a host employer, Weber said.

“There are broader legal obligations that hosts have to the agency workers, such as under work health and safety law,” she said. “That is just a helpful caveat for people to understand that there is the potential for the host to be legally liable in certain circumstances.”