The essential clauses of a labour hire employment contract

You are probably reading this because you are about to put your company's employment contract in front of a worker for the first time, or because a placement has already gone wrong and you are checking whether the paperwork would hold up. Labour hire runs on a simple commercial promise: you employ the people, and your clients direct their day-to-day work. That puts your employees inside other businesses' workplaces, doing work you do not supervise, which is why this contract is one of the most important documents your company owns.

This contract does one job: it records the terms of employment between your company, as the employer, and the workers you supply to hosts. It binds the employment relationship only. The host business is not a party to it, and nothing in it can displace the National Employment Standards (the NES) or an applicable modern award, which set a statutory floor beneath everything you draft. What the contract can do is make obligations clear, protect your client relationships and your hosts' information, and give you room to redeploy staff as placements start and end. The clauses below are the ones that matter most in a labour hire context, and the traps are where most companies get into trouble.

Who the contract says the employer is

The most important sentence in a labour hire employment contract is the one that identifies the employer. Labour hire is triangular: you employ and pay the worker, the host directs the work, and the worker may spend months or years inside the host's business. The contract should state in plain terms that the employee is employed only by your company, that no host is the employer, and that no contract of employment arises between the employee and any host.

Who the employer is determines who carries the pay and leave obligations, who is vicariously liable for the employee's conduct, and who an unfair dismissal claim runs against. The High Court made the principle clear in Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19: vicarious liability follows the employment relationship, and a business that directed a worker's activities without employing him was not liable for his negligence. As the employer, you carry that liability, so a contract that blurs the line between your company and the host is a liability document, not a protection. Draft the clause to cover the following:

• Host references: keep the host out of the contract, or refer to it only as a business you may direct the employee to work for.
• No second employment: state that the employee has no contract with any host, so a placement cannot later be characterised as a second employment.
• Statutory floor: the parties cannot waive NES or award rights by agreement, so the clause should not try to.

What the employee is hired to do

A labour hire workforce is only valuable if it can be moved. The duties clause should describe the employee's role and then give the company genuine flexibility: the employee agrees to perform work for any client or host you direct, at sites and at times you reasonably require, and accepts that placements may start, end or change with reasonable notice. A worker who can only ever be placed with one named client is, commercially, that client's employee in all but name, and you will struggle to redeploy when the placement ends. The duties clause should cover the following:

• Placement flexibility: the employee accepts assignment to different hosts, sites and shifts, subject to any award limits on hours and rosters.
• No entitlement to ongoing placements: state that no placement is permanent and the employee has no entitlement to be placed with any particular host or for any particular period.
• Hours of work: set out ordinary hours and overtime arrangements, and check them against the award that applies, because the NES maximum weekly hours (38, plus reasonable additional hours under s 62 of the Fair Work Act 2009 (Cth)) cannot be contracted around.

The flexibility point cuts both ways. It does not let you avoid redundancy obligations: if a placement ends and there is genuinely no other work, whether the job is redundant under s 119 of the Fair Work Act 2009 (Cth) turns on whether you still require that work to be done by anyone, not on what the contract calls the arrangement.

Pay, awards and the labour hire rules

The NES, set out in s 61 of the Fair Work Act 2009 (Cth), are minimum standards that cannot be displaced by a contract, a modern award or an enterprise agreement. They cover maximum weekly hours, annual leave, personal and carer's leave, paid family and domestic violence leave, public holidays, long service leave, superannuation contributions, notice of termination and redundancy pay, and more. Your employment contract sits on top of that floor and must not purport to replace it.

The harder question is which modern award applies to each placement. Award coverage follows the work performed, so the same employee can fall under different awards as they move between hosts. Record the award you rely on for each placement, without ever suggesting the award's entitlements can be traded away.

There is a further layer specific to your industry. Under Part 2-7A of the Fair Work Act 2009 (Cth), the Fair Work Commission must make a regulated labour hire arrangement order where an employer supplies employees to perform work for a host, the host's enterprise agreement would apply to those employees if the host employed them directly, and the host is not a small business. Once an order is in force, s 306F requires the employer to pay each regulated employee no less than the protected rate of pay, broadly what the host's own employees get for the same work, and the host must provide the information needed to work it out. If you on-hire into businesses with enterprise agreements, this regime can set your pay rates, so the contract's pay clause needs to accommodate it. The pay clause should cover the following:

• Award identification: name the award and classification that apply to each placement, and review it when a placement changes.
• Labour hire orders: check whether a regulated labour hire arrangement order covers any host you supply, and build the protected rate of pay into your payroll process.
• Pay records: the contract should allow the company to pay according to the applicable award and to vary rates when the placement changes.

Casual employment and changing status

Much of the labour hire industry runs on casuals, so the contract needs to handle casual status carefully. The statutory definition of a casual employee in s 15A of the Fair Work Act 2009 (Cth) turns on whether the offer and acceptance of employment was on the basis of no firm advance commitment to continuing and indefinite work. A contract that promises a regular roster of shifts undercuts casual status.

Since the 2023 amendments, a casual employee who has been employed for at least six months (12 months for a small business employer) can give written notice under s 66AAB that they believe they no longer meet the casual definition, and the employer must respond in writing with its decision and reasons. If you decline, the employee can have the dispute dealt with by the Fair Work Commission. This "employee choice" pathway means casual status is not something a contract can simply declare; it has to be true to the way the employee actually works.

Two paperwork obligations go with engaging employees. Under s 125 of the Fair Work Act 2009 (Cth), every new employee must be given the Fair Work Information Statement before or as soon as practicable after starting, and casuals must also receive the Casual Employment Information Statement prepared under s 125A. In an industry that onboards workers quickly, these are easy to skip and easy for a regulator to check.

Confidential information

Your employees spend their days inside your hosts' businesses. They see pricing, customer lists, technical processes, marketing plans and sometimes trade secrets that belong to businesses you do not own. A confidentiality clause in your employment contract is the first line of defence for that information, and hosts increasingly expect you to have one before they let your people through the door.

The clause should do three things. First, define what counts as confidential information, including information of your hosts obtained while on placement. Second, state the permitted use: the employee may use the information only to perform the work for the host, and for no other purpose. Third, state what happens on disclosure, that the obligation survives the end of employment, and that all documents and devices must be returned on termination. The clause should also deal with the following:

• Carve-outs: information that is already public, or that the employee must disclose by law, should be excluded so the clause is not unenforceably broad.
• Host data: to the extent your business handles personal information, the Privacy Act 1988 (Cth) requires APP entities to comply with the Australian Privacy Principles, so the clause should require the employee to handle personal information only as instructed.
• Survival: make confidentiality expressly survive termination, because the risk does not end on the last day of the placement.

Restraints: non-compete and non-solicitation

A post-employment restraint is void unless the employer can show it protects a legitimate business interest and goes no further than is reasonable between the parties and in the public interest. For a labour hire company, the legitimate interests are usually your client relationships, your hosts' clients and the confidential information your people carry, not a general right to stop an employee working in the industry.

A restraint clause is a precision instrument, not a blanket. It must specify what the employee cannot do, for how long, and within what area, and each element must be defensible. A non-compete running for 12 months across the whole state is unlikely to survive if the employee worked on one client in one suburb. A non-solicitation clause stopping the employee from poaching your clients, your hosts' clients and your other staff is easier to justify, because it tracks the relationship the employee actually built. Draft the restraint with the following in mind:

• Cascading options: draft the restraint in stepped periods, areas and activities, so that if the widest step is struck down a narrower one stands on its own, the approach the New South Wales Supreme Court examined in OAMPS Insurance Brokers Ltd v Hanna [2010] NSWSC 781.
• No client of the world: tie the restraint to clients the employee dealt with or learned about, not every client you have ever had.
• Consideration: a restraint agreed at the start of employment, with the job offer as consideration, is more likely to be enforced than one imposed later without something in return.

Injunctions are the enforcement remedy that makes restraint clauses worth having. In Verint Systems (Australia) Pty Ltd v Sutherland [2019] NSWSC 882, the Court noted undertakings restraining non-solicitation and confidentiality breaches where the employer moved quickly. A restraint clause is only as good as your willingness to enforce it promptly, so draft it so a court can see exactly what it is being asked to protect.

Intellectual property

Employees who create things at work present an ownership question. Under the general law, intellectual property an employee creates in the course of employment belongs to the employer, but for a labour hire company there is a wrinkle: the work is often done at a host's premises, for the host's benefit, using the host's materials. The employment contract should assign to you all IP the employee creates in connection with their employment, including work done while on placement, and should require the employee to cooperate in registering or transferring rights.

That assignment needs to line up with your on-hire agreement with the host. If the host pays for the work product, the on-hire agreement should say who owns what, so the employee's IP clause and the host's expectations do not collide. The most common failure is an employment contract that is silent on IP, leaving a host and a departing employee both claiming rights in the same work.

Termination, notice and the end of the relationship

The termination clause sets out how the relationship ends: notice by either side, payment in lieu, summary termination for serious misconduct, and the return of property. The drafting must sit inside the NES rules, because the contract cannot reduce them. Under s 117 of the Fair Work Act 2009 (Cth), an employer must not terminate without written notice of the termination day and either the minimum period of notice, which scales with length of service to a maximum of five weeks, or payment in lieu.

Redundancy deserves special attention in labour hire because placements end all the time. Under s 119 of the Fair Work Act 2009 (Cth), an employee whose employment is terminated because the employer no longer requires the job to be done by anyone is entitled to redundancy pay on a sliding scale from four weeks after one year of service. If you redeploy the employee to another host, no redundancy arises; if there is genuinely no other placement, you may owe redundancy pay. The contract should not try to characterise every placement ending as a resignation.

Unfair dismissal protection is part of the picture too. An employee must complete the minimum employment period, six months (12 months for a small business employer) under s 383 of the Fair Work Act 2009 (Cth), before they can bring a claim, and claims run against you as the employer. A clean termination clause, proper notice and a documented record of why the placement ended are what let you defend them.

Work health and safety duties

A labour hire employment contract cannot transfer WHS liability, and no clause should pretend it can. Under s 19 of the Work Health and Safety Act 2011 (NSW), a person conducting a business or undertaking must ensure, so far as is reasonably practicable, the health and safety of workers engaged by the person and workers whose activities are influenced or directed by the person. The same model duty applies in the other states and territories under their own Acts.

Both you and the host are duty holders for the same worker: you as the employer that engaged the worker, and the host because it directs the worker's day-to-day activities. The employment contract is the place to set out the worker's obligations to comply with WHS rules, follow host inductions and site procedures, and report hazards and incidents. The allocation of practical responsibility, who supervises, who provides PPE and who runs inductions, belongs in your on-hire agreement with each host, and the two documents should be consistent so an injured worker's claim cannot be met with each party pointing at the other.

Indemnities and insurance

Employment contracts sometimes include an indemnity from the employee, protecting the company against loss caused by the employee's breach of contract. It is worth having, but an indemnity from an individual employee is only as good as the employee's assets, and it cannot shift statutory obligations such as WHS duties or workers compensation. The indemnities that matter in labour hire sit in your on-hire agreement with the host: the host indemnifying you for loss caused by following its directions or using its site, and you indemnifying the host for your own negligence and the acts of your employees. Those commercial indemnities, backed by appropriate insurance, are where the real protection lies.

Optional clauses worth considering

Not every labour hire contract needs every clause below, but each earns its place in the right business:

• Probation period: a short probationary period with the right to end employment on shorter notice during it, checked against the applicable award and the unfair dismissal minimum employment period.
• Training and licence costs: recovery of the cost of tickets, licences and training if the employee leaves within a fixed period, useful in industries where placements require certified workers.
• Compliance with host policies: an obligation to comply with each host's reasonable policies and site rules, which keeps a single employment contract workable across many hosts.
• Fitness for work: a requirement that the employee maintain any licences, medical clearances or fitness requirements the work demands, and disclose anything that would prevent them working.
• Survival clauses: express statements that confidentiality, IP and restraint obligations survive termination, so they do not die with the contract.

How an Artificer Legal employment lawyer would review this contract

An employment lawyer reviewing a labour hire contract looks for the places where drafting meets regulation. We would start with the identification of the employer, because that sentence decides who carries every statutory obligation. We would then check the award coverage for each kind of placement you run, and whether any host you supply is subject to a regulated labour hire arrangement order that sets your pay floor. We would test the restraint clause for reasonableness, insist on cascading options so an overreach in one step does not void the whole covenant, and check that confidentiality and IP clauses survive termination. We would read the contract alongside your on-hire agreements and host WHS arrangements, because the two documents need to agree about who directs, who supervises and who indemnifies. And we would push back on anything that purports to contract out of the NES. If you would like a review of your template before your next wave of placements, an Artificer Legal employment lawyer can go through it clause by clause.

The restraint and confidentiality package

If there is one part of a labour hire employment contract where good drafting wins and bad drafting loses, it is the restraint and confidentiality package. An overbroad restraint is void in its entirety: courts will not rewrite an unreasonable covenant to make it fit, which is why the stepped, cascading form that OAMPS Insurance Brokers Ltd v Hanna [2010] NSWSC 781 examined is the standard a careful drafter uses. When a client poaches your best placed employee, the difference between a court granting an injunction and a court telling you the clause was unenforceable from the start is usually how the restraint was drafted, not whether the employee behaved badly. Draft it for the relationship the employee actually has, not the one you fear.

The rest of the contract matters too. Identify the employer clearly, because that decides who carries pay, leave, vicarious liability and unfair dismissal risk. Build in placement flexibility, because your business model depends on moving people. Stay inside the NES and the applicable award, and account for regulated labour hire arrangement orders that can set your rates. Keep confidentiality and IP clauses that survive termination, allocate WHS responsibility with your hosts rather than contracting out of it, and put the meaningful indemnities in your on-hire agreements. A contract that does these things will not prevent every dispute, but it will decide most of them in your favour before they start.