In brief: where there is a labour hire arrangement, the Court is less willing to impose an automatic reduction to damages payable by the host employer

In 2018, the Australian Bureau of Statistics reported that four percent of Australian employees were registered with a labour hire firm or employment agency. With the casualisation of the Australian workforce over the past year, it can be expected that the number of labour hire employees will continue to increase. Host employers and their insurers need to be aware of their potential liability risk should a labour hire worker be injured whilst on assignment.

Shifting liability from employer to host employer

Traditionally, an employer will automatically bear a proportion of liability by virtue of its arduous non-delegable duty of care to its employee. However, in recent times the Courts have been willing to find that a host employer can be 100% liable for a labour hire worker's injury. Due to the disparity in damages available to the plaintiff under the Civil Liability Act (for claims against host-employers) and the Workers Compensation Act (NSW) 1987 (for claims against employers), both the plaintiff and the employer have an interest in minimising the liability of the employer (and with it, shifting the burden to the host employer). 

Now more than ever, host employers must be vigilant in discharging the burden of proof to establish that liability ought to attach to the employer. It is no longer sufficient to simply plead a Section 151Z Workers Compensation Act reduction in a defence. Host employers must make efforts to marshal evidence as to the employers obligations and whether those obligations were discharged.

In Shoalhaven City Council v Humphries [2013] NSWCA 390 the plaintiff suffered injuries to his back and shoulder whilst lifting a large concrete manhole cover whilst on assignment with the Shoalhaven City Council and under the supervision of an employee of the Council. The plaintiff was employed by Campbell Page Labour Hire and he had received no training in lifting a manhole cover, although he had received training from his employer for working in confined spaces. The primary judge determined that there would be no reduction of damages pursuant to Section 151Z(2) by reason that there was no evidence to suggest that the employer knew or ought to have known that the plaintiff would be performing heavy lifting tasks. The Council appealed.

The Court of Appeal unanimously determined that it was most probable that the employer was aware that the plaintiff would be required to engage in heavy lifting whilst on assignment with the Council and accordingly, the employer ought to have taken steps to ascertain from the Council the system of work for heavy lifting tasks. The Court determined that the employer was in breach of its duty of care to enquire as to the system of work, however, it also found that that breach was not causative of the plaintiff's injury. The Court's reasoning was that even if the employer had made those enquiries with the Council, it would likely have been informed of the safe system of work that was in place. On this occasion, however, the safe system was not followed. The Court of Appeal found that even if the Council had made those enquiries, on balance, it would not have changed the outcome for the plaintiff.

In finding that the Council was 100% liable and there would be no reduction pursuant to Section 151Z of the Workers Compensation Act, Leeming JA further noted that the Council failed to discharge its onus of proof in demonstrating that there was a breach of duty by the employer as it had failed to adduce any evidence as to what the employer did (or ought to have done).

The approach in Shoalhaven City Council has been adopted in more recent decisions including the recently decided Avopiling Pty Ltd v Bosevksi [2018] NSWCA 146. In Avopiling, the plaintiff was employed by a labour hire company and assigned to work at a site operated by Avopiling. The plaintiff was injured when Avopiling employees were in the process of erecting a rig when a cable broke causing the plaintiff to be struck by falling objects. The Workers Compensation Nominal Insurer (in place of the plaintiff's employer) issued proceedings against Avopiling seeking indemnity pursuant to s151Z(1)(d) for payments made to the plaintiff. At first instance, these matters were heard together and the primary judge followed Shoalhaven City Council finding that the employer was not in a position to know of the risk of danger to establish negligence and could not have foreseen an accident of such magnitude in relation to the erection of the rig. The Court of Appeal unanimously upheld the primary judge's decision on the basis that it was not demonstrated that the employer knew or ought to have known the risk of harm to the plaintiff in this instance.

Shoalhaven City Council was followed again in Kabic v Workers Compensation Nominal Insurer (No 3) [2017] NSWSC 1281. In this matter, the plaintiff fell from a platform and suffered injury whilst on assignment on a construction site. Button J found that the labour hire employer was in no position to control the state of the building site, neither generally nor on the date of the accident and the host employer was the de facto employer in terms of actually controlling the conditions in which the plaintiff worked. 

Considerations when pleading section 151Z in labour hire injury claims

These recent decisions indicate that where there is a labour hire arrangement, the Court is less willing to impose an automatic reduction to damages payable by the host employer pursuant to section 151Z(2) solely on the basis that the employer has a non-delegable duty of care. Whilst it is not disputed that the employer has such a duty, the Court will require evidence that the employer has breached that duty of care and that breach was causative of the injuries suffered by the plaintiff.

If faced with a claim for injuries to a labour hire worker, a host employer seeking a reduction in damages pursuant to Section 151Z must be diligent to adduce evidence of the employer's notional and actual obligations and whether those obligations were discharged.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.