The Case

MODEC Management Service Pty Ltd (MODEC) had a contract with BHP Billiton Petroleum (BHP) to provide labour to work on BHP’s Pyrenees Venture. Mr Pettifer was employed as a labour hire employee by MODEC to work on the Pyrenees Venture.

On 30 October 2015, BHP informed MODEC it no longer wished to have Mr Pettifer involved in the Pyrenees Venture after a “near miss incident” and directed MODEC to remove him. Under the contract between BHP and MODEC, BHP had reserved an absolute discretion to remove people from its projects.

MODEC complied with BHP’s request and took steps to find alternate work for Mr Pettifer, without success. Therefore, on 25 November 2015, MODEC terminated Mr Pettifer’s employment. Mr Pettifer claimed he was unfairly dismissed.

The Verdict

Commissioner McKenna of the Fair Work Commission (FWC) found the labour hire contract was frustrated as there was nothing MODEC could have done to continue Mr Pettifer’s contract of employment. MODEC had been directed by BHP to remove Mr Pettifer from the Pyrenees Venture and it could not find suitable alternative employment for him.

Mr Pettifer appealed Commissioner McKenna’s decision. The Full Bench of the FWC dismissed the appeal.

The Full Bench added that having been removed from the Pyrenees Venture, Mr Pettifer was then unable to perform the inherent requirements of the job he was employed by MODEC to do.

Lessons

Contracts can become frustrated and not be able to be performed through no fault of the employer. This means the contract comes to an end – not at the initiative of the employer but because the contract cannot be performed by the employee.

This is an important decision as it is common in the labour hire environment for labour hire employers to find themselves in a position where a client no longer wants an employee to be involved in a project. The frustration argument is more likely to be successful where the client has reserved, through its contract with the labour hire agency, the right to direct the labour hire employer to remove its employees from the project.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.