A recent Fair Work Commission (FWC) decision [Pascua v Doessel Group Pty Ltd, U2024/3881], has given Australian business owners/managers, as well as their lawyers and HR advisors, reason to reconsider just how the increasingly popular practice of hiring offshore workers should be approached.
If you currently (or plan to) engage virtual assistants, paralegals, or customer support staff overseas, this ruling could have significant implications for your business, even if you think you’re “playing it safe” by treating them as contractors.
So What Happened?
In Pascua v Doessel, a paralegal working remotely from the Philippines was found by the Commission to be an employee, not a contractor, and was therefore entitled to claim unfair dismissal under the Fair Work Act. This was despite the fact that she operated through her own company and was based overseas, factors which have up until this point been broadly considered by Australian businesses (and others) as a level of protection against such claims.
The FWC’s decision makes it clear: just because a worker is offshore, or invoices through their own business entity, it doesn’t necessarily follow that they’re not your employee under Australian law.
Why Does It Matter?
Many small business owners assume that engaging offshore workers as contractors, especially via their own company, shields them from most if not all employment obligations that apply to Australian-based workers. The Pascua case demonstrates that this isn’t always true, and the Commission will look beyond the paperwork and focus on the reality of the working relationship when making decisions.
In relation to determining the matter of contractor v employee, the Commission typically looks at matters such as:
- the level of control the business had over the worker’s hours and tasks (in this case, there was considerable control by the business)
- the degree of integration of the worker into the business (in this case, the worker was for many intents and purposes treated as a team member), and
- whether the worker relied solely on one business for their income (in this case, the arrangement formed the substantial base of the worker’s income).
The case also demonstrates the Commission’s focus, in the case of overseas workers, on the extent of the “connection” to Australia, when determining whether or not to hear a claim put forward by a worker based overseas. Relevant questions considered might include, for example;
- where is the business based, registered etc…?
- where are the key decisions made?
- to what degree do the workers’ efforts contribute to the core purpose of the business?
- from where is the work controlled?
The Risks for Small Businesses
So, what are the practical risks for small businesses engaging offshore workers?
- Unfair Dismissal and/or Other Claims: Offshore workers may be able to bring claims against your business, even if they’re not based in Australia.
- Backpay and Entitlements: If a worker is found to be an employee, you could be liable for Award rate wage underpayments, unpaid leave, superannuation, and other entitlements.
- Penalties for Non-Compliance: Failing to comply with the Fair Work Act can result in significant penalties and reputational damage.
- Uncertainty and Disruption: Legal disputes can disrupt your business, drain resources, and impact team morale.
Practical Steps to Reduce Your Risk
If you engage offshore workers, here’s what you can do to help protect your business:
- Review Your Arrangements: Look closely at how you engage offshore workers. Are they truly independent contractors, or are they functioning like employees? To what degree are they integrated into your business, and/or treated as “part of the team?
- Independent Contractor Agreements: If you use contractors, ensure you have robust agreements in place that clearly and accurately/genuinely define the relationship and expectations.
- Limit Control: Avoid exerting too much control over how, when, and where work is done. The more autonomy your contractors have, the less likely they’ll be classified as employees.
- Diversify Work Sources: If your offshore worker relies solely on your business for income, the risk of being deemed an employee potentially increases.
- Update Documentation: Make sure your contracts, policies, and procedures are up to date and reflect the true nature of your working relationships.
- Seek Professional Advice: Employment law is complex, especially when it comes to cross-border arrangements.
It’s important to note that even with the best agreements and intentions, there’s no way to completely eliminate the risk. But taking these steps can help to reduce your exposure.
Final Thoughts
The Pascua v Doessel case is a wake-up call for any small business using offshore workers. It’s no longer enough to assume that distance or paperwork will protect you from Australian employment laws. Now is the time to review your arrangements, update your documentation, and ensure you’re compliant.
Case Reference: Pascua v Doessel Group Pty Ltd (U2024/3881) – refer here for full decision, opens as PDF
This article provides general information which we believe to be correct at the time of posting. It is a summary and must not be considered complete, professional or legal advice. If you’re an employer and need support that takes into account your particular circumstances, please contact us directly.
