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*This alert is particularly important for those businesses that engage employees in a labour hire arrangement.

As part of the changes effected by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) (effective 15 December 2023), we are now seeing an increasing number of Fair Work Commission decisions being made in relation to Labour Hire Arrangement Orders (LHAO).

In essence, an LHAO is designed to regulate labour hire arrangements by ensuring that labour hire employees are paid no less than the rates which they would have received if they were directly employed by the host business under its applicable employment instruments. It aims to prevent the undercutting of bargained wages through the use of labour hire workers.  

How does this affect my business?

If you employ employees under a labour hire arrangement and the host business has an enterprise agreement or other employment instruments under which they employ their staff, you may be exposed to paying your employees, who perform the same duties as the host business employees, the rates as stipulated in the host employees relevant agreements. Importantly, this rate includes all entitlements under the instrument, including loadings and penalty rates.  

Application & coverage:

A LHAO can only be made upon application to the Fair Work Commission and only by an employee of the labour hire company or of the host business, a Union, or the host business.

A LHAO will not be made where:

  • The host business is a small business employer; or
  • The performance of the work by the labour hire employee is, or will be, wholly or principally providing a service, instead of supplying labour; or
  • It is not fair and reasonable in all the circumstances to do so; or
  • A training arrangement exists for the labour hire employee; or
  • There is an exemption period in place (e.g. engagements of less than 3 months will generally not be affected).

A LHAO may also cover multiple labour hire employers.

The Fair Work Commission may order a specific end date for the LHAO. If no date is detailed, then the LHAO remains in force until it is varied or revoked by the Fair Work Commission. Importantly, an LHAO does not automatically cease to be in force when the applicable industrial instrument ends and any new industrial agreement will continue to apply to the labour hire employees.

What you should consider:

If you are a labour hire business, you ought to check whether the host employer has an industrial instrument and, to reduce your risk of being subjected to an LHAO consider, unless one of the exceptions applies, paying your employees in accordance with that instrument.

In the event that you are affected by an LHAO, you may wish to consider the arrangements for the supply and use of labour to anticipate and manage the business arrangements.

Ask for help:

Labour hire arrangements can involve complex considerations, particularly given the number of parties involved. If you require any assistance or advice regarding any of your existing agreements, please contact one of our Workplace lawyers for specific advice and assistance.

For further information, contact Danny Clifford.

The assistance of Monique Chow, Lawyer, in researching this article is gratefully acknowledged.