A worker (let’s call her ‘Kelly’) injures herself at work. Who is most liable – the host employer (which we will refer to as “Host”) or the labour hire company (which we will refer to as “Employer”)?
Author: Farrah Motley, Solicitor of the Supreme Court of Queensland.
So - here’s the thing; the host employer and the labour hire company are, in most cases, both on the hook to contribute towards the loss Kelly has suffered as a result of her personal injury. I say ‘in most cases’, because depending on which State or Territory Kelly injured herself in, the level of contribution may differ quite significantly. This will depend on the terms of the contract between the host employer and the labour hire company, the relevant legislation and (just maybe) the respective insurance coverage of each of the host employer and the labour hire company.
Firstly, the labour hire company is the literal “employer” of Kelly; it has a contract of employment with Kelly, pays her superannuation, her wages, annual leave and other entitlements, etc. Under Australian law (no matter which State and Territory we’re looking at), the labour hire company must obtain a policy of workers’ compensation insurance in respect of Kelly.
On the other hand, the Host is not Kelly’s employer. The Host simply requires Kelly’s services for a certain period of time or for a certain task and compensates the labour hire company for this.
Kelly can make a claim:
under the respective workers’ compensation acts against her Employer, including a Common Law claim for damages; or
against the Host under the relevant personal injury/civil lability acts.
Round 1: Worker versus labour hire employer
There is an employment relationship between Kelly and her Employer, which means Kelly is covered by the Employer’s workers’ compensation policy of insurance. Kelly makes a claim under this policy.
The workers’ compensation insurer, in order to protect its own interests and those of the insured Employer, seeks indemnity from the Host.
Here’s where it gets interesting.
Q: Can the Host enforce its contractual indemnity against the Employer in relation to the claim for indemnity made against it by the workers compensation insurer? Note: the contractual indemnity requires the Employer to indemnify the Host for loss caused by the Host’s own negligence.
A: At least in Queensland and Victoria, the answer is no.
Reason: In Queensland and Victoria, the relevant workers’ compensation acts contain a provision that renders any contractual indemnity from the Employer in favour of the Host (for the purposes of WorkCover) unenforceable. The Queensland legislation was amended in response to a Queensland court decision, which resulted in WorkCover Queensland being required to indemnify an employer under a contractual indemnity covering loss arising from the host’s own negligence. This case was significant because the host was not the insured under the policy (by virtue of the fact it was not the employer) but was able to recover its loss under the policy because of the contractual indemnity.
Q: If the Host has a policy of public liability insurance, it may have to pay an additional excess because the claim relates to personal injury. In these circumstances, the Host may be more willing to pursue the Employer. But can it, if the workers’ compensation act prohibits enforcement of a contractual indemnity?
A: Yes, the Host can still enforce the contractual indemnity, but this sits outside of the workers’ compensation framework. The Host can still pursue the Employer for breach of contract, but unless the loss is significant and the contractual indemnity and other obligations of the Employer are watertight, this may not be a viable option as the cost to recover the loss may outweigh the amount of loss itself.
In either case, both the Host’s and the Employer’s insurance premiums go up.
Round 2: Worker versus host employer
There is no employment relationship between Kelly and the Host, so she is not covered by the Host’s workers’ compensation policy of insurance. However, as she has injured herself on the Host’s premises, she is likely to be covered by the Host’s public liability policy of insurance.
Kelly makes a claim against the Host under the relevant personal injury / civil lability act. Under those acts, the Host is only liable for loss to the extent it caused or contributed to it (i.e. proportionate liability applies).
Because proportionate liability applies and:
Kelly is unlikely to accept the risk that she may only be able to recover less than the full amount of her loss (for example, if the Host is found to be only 70% liable, Kelly can only recover 70% of her loss from the Host); and
the Host will want to shift as much of its liability to someone else (for example, arguing that it is in fact only 50% liable),
it’s likely that Kelly will also make a claim against the Employer and / or the Host will join the Employer to the claim as a contributor of the loss.
How can Host Employers and Labour Hire Companies Reduce Liability for Worker Injuries?
There are strategies that both a Host and an Employer can use (within the confines of the law) to shift liability onto one another. Contact Prosper Law, a boutique commercial law firm today to find out how.
Want to read more? Check out this article which explains what to do if your business gets a negative review.
Author: Farrah Motley | Legal Principal
PROSPER LAW - A Law Firm for Businesses
M: 0422 721 121