FIVE (5) TOP TIPS TO MINAMISE LABOUR HIRE CLAIMS

It has become apparent that some senior management at ‘host’ employers still believe that “it’s not our responsibility but the employer’s” to ensure labour hire workers have the correct training, supervision or tools to do their work.

For example, in the 2012 NSW Supreme Court case of Milich v Council of the City of Canterbury , (which concerned an injury to a labour hire worker who was operating a Council garbage truck), the Council’s supervisor gave adamant evidence that he thought the Council had no responsibility at all to ensure that ‘casuals’ had the appropriate training in lifting heavy objects (e.g. garbage bins), because “that was left up to their direct employer to do”.

Labour hire is one of those flexible employment arrangements that’s become a modern staple in our workforce. But if this recent claims experience is anything to go by, there still seems to be a ‘disconnect’ between what the law expects when it comes to worker safety, and what parties who engage labour hire actually understand their obligations to be.

When a risk exposure like labour hire attracts (in many cases) big injuries and big claims, it pays to take stop and take stock every once and a while of the liability fundamentals that underpin this relationship and consider what more can be done to minimise the risks.

They’re not my employee, so why worry?

The seemingly ‘relaxed’ attitude displayed by some ‘host’ employers is concerning but also completely understandable.

The indirect nature of the labour hire arrangement and the apparent ‘overlap’ in risk responsibilities shouldered by the worker’s ‘host’ and direct employers can often trick the unwary into thinking they are either not responsible at all for some worker safety issues or are in some way absolved from meeting the high standards of care the common law requires employers to meet in the workplace.

But nothing could be further from the truth.

In fact, since the watershed NSW Court of appeal decision in 2003 in TNT v Christie, the Australian courts have consistently found that not only do labour hire workers’ direct employers – (their labour hire company) – owe onerous duties of care to ensure their employee’s safety at work, ‘host’ employers also owe those workers that same high duty of care.

The logic behind this is of course simple: a typical labour hire arrangement sees the worker employed by their labour hire company but then deliberately placed to work under the control, supervision and/or direction of another (the ‘host’ employer).

The law recognises that despite the indirect nature of that relationship, the worker is in as much a position of dependence and vulnerability with their ‘host’ employer as they are with their direct employer. Workers are therefore legally entitled to hold both their direct and ‘host’ employers accountable to ensure issues of safety and risk at the workplace are properly managed and minimised.

‘Host’ employers are well & truly in the Courts’ sights

In the case of TNT v Christie, the Court apportioned responsibility for Mr Christie’s injuries on a 75 / 25 basis, in favour of his direct employer.

That judgment and the fact that ‘host’ employers (and their liability insurers) are more likely to wear the majority of any common law damages claim is not surprising.

The Courts’ division of responsibility in that seminal case reflects the modern reality of labour hire arrangements and accidents – that typically it will be the ‘host’ employer who is ‘Johnny on the spot’ at the time of the injury, and therefore the party most able (and therefore most culpable) to prevent or minimise the risk that eventuated.

Whilst its true that the liability and financial outcome of any labour hire claim will very much be fact-dependent, it’s also fair to say that (in the absence of a complete defence) the application of the “75 / 25 rule” (considered by some to have been established as the norm for labour hire cases by TNT v Christie), is now a thing of the past.

A cursory glance at the superior court decisions handed down over the past few years indicate that, on average, host employers are receiving a 90% or higher apportionment of damages when the matter goes to trial.

As the chart below shows, Australian courts handed down orders requiring ‘host’ employers to pay 80% or higher of an injured labour hire work.

Workers’ compensation insurers have the box seat

Adding to the high risk profile of ‘host’ employers is the fact that with the help of State legislation, the chips are very much stacked in favour of labour hire companies and their worker’s compensation insurers when it comes to the pursuit and defence of common law injury claims.

Most States and Territories now have legislation which either prohibits or significantly limits a worker’s right to pursue a common law claim against their direct employer. In a labour hire scenario, that means the obvious and often easiest target for an injured worker is the ‘host’ employer and their liability insurer.

And even when the direct employer can be sued directly, many of our State laws give significant advantages to worker’s compensation insurers by limiting the damages payable by them or providing a legislative ‘leg up’ in their ability to aggressively pursue recoveries from ‘host’ employers.

What to do? 5 Top Tips…

So what is a ‘host’ employer to do to better manage these risks and reduce their liability exposures? Here are a few suggestions:

1. Safety First

It seems trite to say, but prevention is always better than the cure – especially when it comes to safety.

It is essential, particularly when a workforce is made up of a mixture of direct employees, contractors and/or labour hire workers, that safety is put as a number-one priority at any host employer’s workplace.

Appropriate risk management frameworks must be constantly identified, revised, documented and implemented to ensure all workplace risks and accidents are kept to a minimum.

2. Correct Internal Misconceptions

Information and training which communicates the significant responsibilities ‘host’ employers have when it comes to safety and labour hire workers must be undertaken, particularly for supervisors, safety officers and leaders within the ‘host’ organization.

The misconception that ‘host’ employers are somehow ‘protected’ from claims because these workers are not direct employees or working there for only a limited period of time, is all too common and may lead, as we’ve seen, to a dangerous relaxation of safety standards and risk management practices.

3. Get it in writing and negotiate advantageous terms

Written labour hire contracts, signed and dated, provide a fundamental safeguard which helps ensure each party to the arrangement understands their respective rights and obligations.

They also form key evidence necessary to prove the agreed responsibilities, should there be a claim. A failure to keep copies of relevant documents, particularly labour hire contracts and associated documentation, can prove fatal to any claims defence.

Negotiating a contractual indemnity in your favour, and other contract terms such as obligations to insure and warranties as to the fitness of workers provided to you are also essential.

A written indemnity clause in a labour hire contract is a critical risk management tool. If such a promise can be negotiated, and the jurisdiction applicable has no legislation to prevent its effectiveness, a contractual indemnity in your favour is an obvious, and often the most effective, means of transferring risk onto a labour hire employer.

Terms which oblige the labour hire company to take out insurance noting the interests of the ‘host’ employer will also provide added comfort and protection, should there be a claim.

So too will contractual terms which state that the labour hire company warrants the fitness of the workers provided and their capacity and training to do the job required . In the absence of an express contractual provision, the law will not impose an obligation on a labour hire company to warrant the fitness of the workers provided to you.

4. Work together & act promptly to minimize any risks

Labour hire company inspections of ‘host’ worksites coupled with open and regular dialogue on health and safety issues can only improve the safety of these workers and reduce risk exposures.

The involvement of labour hire companies in safety issues (particularly with shorter term assignments) can also potentially assist a ‘host’ to defend a later claim by the injured worker (especially if these are documented).

Host employers should also ensure they consider and react promptly to any risk reports or issues raised by the labour hire company, either in writing or otherwise, regarding the safety of their workers at the ‘host’ premises.

Formal (and documented) feedback and communication channels between ‘host’ employers and labour hire companies should be encouraged.

5. Have current risk management plans in place – especially insurance

Should a workplace accident involving a labour hire worker occur, it is important that ‘host’ employers have risk management protocols (including the completion of incident reports, retention of worker and witness details, collation and preservation of evidence such as photos or storage of damaged equipment) that are communicated, accessible and implemented.

It is also imperative that ‘host’ employers have appropriate liability insurance in place, as workers’ compensation insurance will not respond to labour hire claims. The terms of any insurance policy should be read carefully in the context of the labour hire agreement, to ensure there are no applicable exclusions in your cover (e.g. assumption of contractual risk).

Source :

This Article was written by Megan O’Rourke Special Counsel, B.N Insurance & Health reprinted by VeriSure.  

Action Plan : VeriSure are Specialist Risk Advisors and can assist you in this area.  Simply contact us and one of our Senior Advisors will discuss your risk exposures.