The last three decades have seen a proliferation of labour hire arrangements across a number of industries in Australia: in construction, non-employee workers comprise 39 percent of the workforce, while in agriculture, forestry and fishing, non-employee workers comprise 56 percent of the industry.1
When labour hire companies assign their employees to work at sites controlled by other companies, the question of liability for those employees’ injuries becomes a source of great uncertainty for the companies.
Weathered practitioners are well aware that section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) and section 151Z of the Workers Compensation Act 1987 (NSW) can offer up more questions than answers when it comes to apportioning liability between labour hire employers and host employers for injuries sustained in the course of employment.
It is clear that a labour hire employer owes its employee a non-delegable duty of care, meaning that when labour hire companies place employees on external work sites, they still risk having to contribute to compensation for workers’ injuries.2
This is the case even though the labour hire employer is likely to have little to no control over the workplace conditions dictated by the host employer or knowledge of day-to-day tasks expected of their employees.
In instances where the employee commences proceedings against the labour hire employer and host employer, the effect of section 151Z of the Workers Compensation Act 1987 (NSW) and section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) operates to call for contributions from the labour hire employer and host employer, in proportion to their liability, to the employee’s claim for damages.
To apportion liability, the Court makes a comparison of how far each party has departed from the reasonable standard of care and the significance of each party’s negligence in causing the employee’s injury.3
That comparison must involve a level of “clear and broad discretion”,4 which makes the task of assessing apportionment unpredictable.
Heavier apportionments were made towards the labour hire employers in Thornton v Wollondilly Mobile Engineering  NSWSC 621 (30 percent) and Carr v O’Donnell Griffin  NSWSC 840 (20 percent) where the labour hire employers made little to no effort to inspect the host employers’ workplace.
By contrast, the labour hire company escaped a finding of liability in Kabic v Workers Compensation Nominal Insurer (No 3)  NSWSC 1281. In that case, Button J held that the labour hire employer was not liable for the employee’s injury on the host employer’s construction site because the risk identified, that being an accumulation of water on a formply surface on a deck of scaffolding on which the employee slipped, was (at ) “highly specific to a particular time and place, [such] that enquiries and inspections undertaken by [the labour hire employer] would have achieved little or nothing”.
A similar conclusion was reached in in Castillo v Presmist Formwork Contractors Pty Ltd  NSWDC 6. The employee was engaged in manoeuvring sheets of formwork, which the Court held to be “semi-skilled work such that it was the requirement of the [host employer], and not the [labour hire] employer, who devised the work tasks and undertook the responsibility to supervise the [employee] in the performance of those tasks”. The risks associated with the work were also “dynamic”, “within the particular knowledge of the [host employer]” and “arose on an ad hoc basis”.5
But in Marketform Managing Agency Ltd v Ashcroft Supa IGA Orange Pty Ltd  NSWCA 36, and despite reasonable efforts by the labour hire employer to carry out inspections of the host employer’s premises, in which it found no evidence of the risk that eventually resulted in the employee’s injury, 10 percent was apportioned to the labour hire employer. The Court of Appeal affirmed (at ) the conclusion of the primary judge that “the non-delegable character of the employer’s duty of care”6 required some apportionment to the employer.
The reasoning in Marketform might cast doubt on the ability of labour hire companies to escape liability altogether as in Castillo and Kabic, but the core reasoning in Kabic is still compelling: though a labour hire company owes its employee a non-delegable duty, it will not always be that the labour hire company has breached that duty in the circumstances.
Apportionment of liability in this context is unpredictable, but host employers and labour hire companies should be wary of the trends emerging from the case law. For example, it is incumbent on labour hire employers to make appropriate inspections of the host employer’s premises to assess risks and respond accordingly. This may mean doing more than merely keeping in regular contact with one’s employees. Instead, it may require the labour hire employer to attend and inspect the host employer’s premises from time to time, even if the site is some distance from the labour hire employer’s own business.7 Similarly, a host employer cannot simply rely on the notion that an employer owes a non-delegable duty of care and must similarly take steps to ensure a safe place of work is provided.
Beyond inspections, labour hire employers should ensure that they provide appropriate occupational health and safety training and inductions to their employees, ideally in conjunction with the host employer. It is also incumbent on the host employer to maintain the appropriate level of supervision over workers placed from labour hire arrangements.
This article was written by Joanna Apostolopoulos, Partner, Audrey Chan, Associate and Nicholas Chivers, Law Clerk.
1. Dr Katie Hepworth, Labour Hire & Contracting Across the ASX100 (Report, 12 May 2020) 11.
2. TNT Australia Pty Ltd v Christie (2003) 65 NSWLR 1, 15 - (Mason P).
3. P & M Quality Smallgoods Pty Ltd v Leap Seng  NSWCA 167,  (Barrett JA); see also Podrebersek v Australian Iron & Steel Pty Ltd  HCA 34; (1985) 59 ALJR 492.
4. P & M Quality Smallgoods Pty Ltd v Leap Seng  NSWCA 167,  (Barrett JA).
5. Castillo v Presmist Formwork Contractors Pty Ltd  NSWDC 6, - (Levy SC DCJ).
6. Paul v Ashcroft Supa IGA Orange Pty Ltd  NSWDC 101,  (Russell SC DCJ).
7. Carr v O’Donnell Griffin  NSWSC 840, - (Harrison AsJ).