At first glance, these scenarios suggest a gap in liability: the original employer may have terminated the worker’s employment; the host employer has no contractual relationship with the worker; and the worker continues to receive weekly compensation payments from the employer, which is reimbursed by the employer’s insurer. However, the legal position is more nuanced, which turns on whether the injury arose “in the course of employment”.
Starting point: “In the course of employment”
Under the Workers Rehabilitation and Compensation Act 1988, liability turns on whether a physical injury arises out of or in the course of employment.
The concept is interpreted broadly and is not confined to active work duties, or to periods where a formal employment contract is on foot. Instead, it extends to circumstances sufficiently connected with employment, which also captures activities incidental to employment.
The High Court Anchor: Hatzimanolis v ANI Corporation Ltd [1992] HCA 21
Hatzimanolis provides the central framework. In practical terms, the High Court determined that an injury may still arise in the course of employment where:
▪ The worker is within an overall episode of employment;
▪ The employer has, expressly or impliedly, induced or encouraged the place the worker is at, or the activity the worker is undertaking;
▪ The injury occurs in that setting; and
▪ There is no gross misconduct.
Crucially, the High Court emphasised that the analysis must look at the general nature, terms and circumstances of employment, not just the immediate incident.
Host Employment: How It Fits
Host Employment typically arises where the worker has an accepted compensable injury, and the original employer is unable to provide suitable duties. The employer’s insurer would then facilitate a host placement to support rehabilitation and return to work efforts.
Notably, employers have an obligation under s143M of the Act to ensure that injured workers are given suitable alternative duties to perform. Arguably, this obligation survives any termination of employment if the employer remains liable for a compensable injury.
The legal question is whether the host placement is part of the employment continuum. In the majority of return-to-work scenarios, the answer will often be yes because:
▪ The placement is arranged or endorsed by the employer’s insurer;
▪ The duties of that placement are tied to the worker’s medical capacity for work; and
▪ The worker is attending that placement because of the compensable injury.
Applying Hatzimanolis, the host placement is arguably an interval or interlude within the broader episode of employment. A worker who is placed with a host employer as part of a rehabilitation or return-to-work plan is not acting independently. Rather, the placement is typically arranged, approved or facilitated by the insurer or employer for the purposes of rehabilitation. Host employment is commonly used where the original employer cannot provide suitable duties, enabling the worker to re-engage in productive activity consistent with their medical capacity. In that sense, the worker’s presence at the host workplace, and the duties they perform there, are not incidental or voluntary in any meaningful way—they are a direct product of the compensable injury and the structured return-to-work process.
Against that backdrop, host employment can be characterised as part of an “overall episode of employment” within the meaning contemplated in Hatzimanolis. Even where the original contract of employment has been terminated, the worker’s activities during a rehabilitation placement remain connected to, and indeed arise from, the original employment. The insurer’s involvement in arranging or endorsing the placement is critical. It provides the necessary element of inducement or encouragement such that the worker’s activities fall within the course of employment.
Practical Takeaways for Employers and Insurers
Host employment scenarios are less about contractual labels and more about characterisation.
Where a worker sustains a new physical injury while undertaking host employment as part of an insurer-facilitated return-to-work program, the claim will ordinarily be made against the original employer. This is because the host duties are induced or encouraged by the employer, such that the injury may still be characterised as arising in the course of employment, notwithstanding its distinct nature.
For insurers and employers, these issues underscore the importance of careful management of return-to-work arrangements. The way in which a host placement is documented and implemented can materially affect the characterisation of any subsequent new injury. Clear evidence that the placement forms part of a rehabilitation process, and is undertaken at the direction or with the endorsement of the insurer, will support an argument that the worker remains within the course of employment. On the other hand, ambiguity in those arrangements may expose insurers to contested liability or unintended gaps in coverage.
The real question is:
Was the worker engaged in an activity induced or encouraged by the employer at the time of sustaining the physical injury, viewed in its broader context?
Where the answer is ‘yes’, Hatzimanolis provides a strong foundation for concluding that the injury arose in the course of employment, and liability is with the employer and its insurer.
