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Labour hire clauses in certified agreements –valid or not?

Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 86, 9 August 2005

Two recent decisions of the Australian Industrial Relations Commission illustrate the differing views about whether certified agreements can include provisions regulating the wages and conditions for third party labour hire employees.

A Full Bench considered whether a labour hire clause in the Australian Air Express certified agreement was valid. The clause required Australian Air Express to ensure that labour hire employees received the same rate of pay as its own employees. Senior Deputy President Harrison and Commissioner Smith considered that the clause was valid on the basis that it pertained to the relationship between Australian Air Express and its employees because the employees believed that their jobs and livelihood could be undermined if the provision was not included.

Senior Deputy President Hamberger dissented. In his view the clause interfered with the contractual relationship between the host employer and the labour hire employer and went well beyond the employment relationship.

In another recent case, Commissioner Richards considered the validity of a labour hire clause in the Bundaberg Foundry Engineers certified agreement. The clause provided that the labour hire employees were to receive the same rates of pay as the Bundaberg Foundry employees and, in the event of a downturn in the business, the labour hire employees would cease working at the site before any positions held by permanent employees were made redundant.

Commissioner Richards determined that because the clause placed a prohibition on the use of labour hire in certain circumstances (if there was a downturn in business) it was not valid. He did not reach a decision about whether the requirement that labour hire employees receive site rates was valid, but he noted that it was open to argument that the payment of site rates did amount to a partial prohibition or constraint on the engagement of labour hire.

HR Tip

Employers should take care if including clauses about the use of labour hire in certified agreements. Although there is authority that labour hire clauses are valid, there is still room for argument that clauses prohibiting, or partially prohibiting, the use of labour hire are invalid.

Caution should be exercised by labour hire employers who agree with host employers to pay site rates. An agreement to pay site rates will not override a labour hire employer’s obligations to engage its workers in accordance with the relevant industrial instrument such as a Federal or State award.

Sharlene Wellard
Senior Associate
Australian Business Lawyers