Overseas contractors may be your employees

In a previous article, we analysed the impact of the FairWork Pascua decision, where the Fair Work Commission clarified that the substance of a working arrangement matters much more than the label attached to it.

Initial Decision

The decision in Pascua v Doessel Group Pty Ltd ([2024] FWC 2669) ruled that simply describing an arrangement as “independent contracting” does not exempt a business from its obligations under the Fair Work Act. In that decision, Deputy President Slevin found that the label ‘independent contractor’ and the fact that Ms Pascua worked from the Philippines did not prevent the Deputy President from finding that Ms Pascua’s day-to-day responsibilities—including adherence to Australian business hours, the use of company systems, and an hourly remuneration model—closely resembled an employment relationship. This ruling serves as a warning to all that the legal reality is determined by the nature of control, supervision, and integration into the business rather than merely by contractual labels.

New Developments

The Dossel Group Pty Ltd appealed the 2024 decision, arguing that the Deputy President’s conclusion was factually incorrect and that the Fair Work Commission had no jurisdiction over a case where the applicant was a Philippine national who had never worked in Australia nor did she hold a work visa enabling her to work in Australia.

On appeal, the Full Bench of the Fair Work Commission did permit the Dossel Group’s appeal that Part 3-2 of the Fair Work Act could not apply to employees of Australian employers performing work overseas.

The Full Bench endorsed the conclusion of the Deputy President in determining that Ms Pascua and the Doessel Group were in an employment relationship [2025] FWCFB 43

Takeaways

Australian businesses must actively evaluate their practical realities of how businesses are engaging with independent contractors genuinely reflects an independent contractor relationship. Failure to ensure that the practical realities that businesses work within will not cure the misclassification of workers—even if those workers do not have the right to work in Australia.

Operational Adjustments

So, if your company engages remote workers, you must review these arrangements as this decision demonstrates that it is no longer sufficient to rely solely on contractual language; operational practices must also align with the intended classification. Two key considerations are the level of supervision and the method of remuneration.

Cross-Border Implications

The Pascua case shows that the mere physical location of a worker and the fact that they do not have the right to work in Australia does not automatically exclude an employee from the protections of the Fair Work Act. Even when tasks are performed overseas, the statutory safeguards may remain in force if the employment relationship is formed or managed from Australia.

Practical Recommendations for Businesses

Given these developments, Australian businesses are advised to:
  • Conduct a comprehensive audit of contractual terms and everyday management practices for all offshore engagements, including evaluating whether the level of operational control inadvertently creates an employment relationship.
  • Engage with lawyers to realign contracts and practices with legislative requirements.
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