Offering employment to labour hire workers constitutes a transfer of business

The recent decision of Burdziejko v ERGT Australia Pty Ltd [2015] FWC 2308 has significant consequences for employers when offering direct employment to labour hire workers. The Fair Work Commission determined in that case that a transfer of business was triggered when the employer offered employment to the labour hire worker. This meant that the labour hire worker had access to unfair dismissal, as their service with the labour hire provider counted as service with the new employer.

The facts

On 10 June 2014, Ms Burdziejko was hired by Hays (a labour hire provider) to work at ERGT Australia Pty Ltd (ERGT). After three months, ERGT offered Ms Burdziejko employment with the company to continue the same work. Ms Burdziejko’s employment with ERGT was subsequently terminated, and she alleged that she had been unfairly dismissed.

The law

The Fair Work Act 2009 (Cth) (FWA) provides that an eligible employee must have been employed with an employer for at least six months to be protected from unfair dismissal (unless the employer is a small business, in which case the period is 12 months).

A period of employment with one employer will count as employment with another employer if a ‘transfer of business’ has occurred. A transfer of business will occur if:

• the employee’s employment with the old employer has terminated;
• within three months, the employee becomes employed by the new employer;
• the work that the employee is performing for the new employer is the same, or substantially the same, as they were performing for the old employer; and
• there is a ‘connection’ between the old and new employer.

The issue in contention in this case was whether there was a connection between the old employer (Hays) and the new employer (ERGT) as the other three conditions were satisfied. Relevantly, a connection is said to exist where the new employer outsources the work to the old employer, but then ceases to outsource the work and returns to performing the work in-house.

The Fair Work Commission was satisfied that this had occurred and since ERGT had not expressly informed Ms Burdziekjo that it would not recognise her prior service with Hays for the purposes of unfair dismissal prior to her commencing employment with it, her service with Hays was counted. She therefore had served the minimum qualifying period and was able to pursue her unfair dismissal application.

Implications for employers

Employers should be aware that they may trigger a transfer of business if they outsource particular work to a labour hire provider and then directly employ its labour hire worker performing that work when bringing that function back in-house.

In practical terms, this means that the service of the labour hire worker with the labour hire provider may count as service with the new employer. This has consequences for access to unfair dismissal and leave accruals.

It also means that employers could be inadvertently bound by the terms of conditions of an industrial instrument (such as an enterprise agreement) of the labour hire provider upon transfer.

This article originally appeared in Cooper Grace Ward’s Workplace Relations & Safety Risk Management Adviser – May 2015. Click here to download the full newsletter