Offshore workers, onshore obligations: the hidden risks of engaging overseas workers

As Australian businesses increasingly leverage overseas talent, particularly through remote working arrangements in countries such as the Philippines, two recent Fair Work Commission decisions have confirmed that Australian workplace laws can extend well beyond our borders.

Employers who assume that geographic distance insulates them from domestic employment obligations may find themselves liable for minimum entitlements and exposed to claims, such as in respect of unfair dismissal. In this Insight, we explore what these decisions mean for Australian employers and how employers can mitigate liability when engaging overseas workers.

The Fair Work Act 2009 (Cth) (FW Act) applies to Australian-based employees in relation to their Australian employer. An Australian employer includes any trading or financial corporation formed within the limits of the Commonwealth and the Commonwealth itself.

An Australian-based employee is defined in broad terms under section 35(2) of the FW Act as an employee:

• whose primary place of work is in Australia;
• who is employed by an Australian employer (whether located in Australia or elsewhere); or
• who is prescribed by the regulations.

There is an exception to s 35(2)(b) such that the FW Act will not apply to an employee where both of the following limbs are satisfied:

• the employee must be "engaged outside Australia"; and
• the employee must be performing duties outside Australia.

In most cases, the second limb is easy to satisfy where remote workers live and work in another country. The determining factor as to whether an employee is exempt from the coverage of the FW Act is usually where the employee is “engaged”.

In Doessel Group Pty Ltd v Pascua [1] (Doessel Group), the Full Bench of the Fair Work Commission (FWC) considered various authorities that found that a person will be “engaged” in the place where the contract was formed and that a contract will be formed in the location where acceptance of the contract was received by the employer.

In the modern era of contract acceptance occurring by way of a candidate emailing a signed contract to the employer or electronically accepting the terms of an employment contract via an online platform, the location where the acceptance of the contract was received will usually be deemed to be the employer’s registered business address.

Where the employer’s registered business address is in Australia and the contract acceptance is communicated back to the employer directly, the risk arises that the first limb of the exception will not be satisfied and the employee will be an “Australian based employee” whose employment is covered by the FW Act.

The Full Bench in Doessel Group did not make a final determination in respect of the s 35(3) exemption due to incomplete evidence regarding the place of formation of the contract and refused permission to appeal. The FWC ultimately found that, despite performing work under an Independent Contractor Agreement entirely from her home in the Philippines, Ms Pascua was an Australian based employee to whom the FW Act applied, having regard to the true nature of the relationship, including Ms Pascua’s duties, high degree of control over the work performed, requirement for personal performance and payment of an hourly rate of pay.

In Sanderson v Brightest Australia Pty Ltd [2], Mr Sanderson lived in New Zealand and was employed to sell the employer’s software products exclusively to New Zealand customers.

Applying the principles set out in Doessel Group, Deputy President Farouque found that, while the second limb of the exception in s 35(3) of the FW Act was satisfied, as Mr Sanderson undertook the majority of his work in New Zealand, the first limb was not. Mr Sanderson was found to have been engaged within Australia, as he had accepted the offer of employment by sending an executed employment agreement by email to the employer, resulting in the contract of employment being formed in Victoria (the employer’s business address).

As a result, the FWC found that Mr Sanderson was an Australian-based employee who was entitled to access the unfair dismissal jurisdiction and that his dismissal was harsh, unjust and unreasonable, with compensation ordered.

Australian employers engaging workers overseas, whether characterised as employees or independent contractors, face material risks if the contracts are formed in Australia that those workers will be Australian-based employees covered by the FW Act.

The key implications of this include:

• Workers will be entitled to Australian minimum employment standards, including the National Employment Standards in the FW Act and the minimum terms and conditions (including wages) provided under any applicable modern award. A failure to provide an employee with these minimum entitlements can result in an underpayment claim, an order to pay civil penalties and, in cases of "knowing or reckless" contravention, potential wage theft liability involving significant penalties and imprisonment for key persons;
• Workers will have access to dismissal jurisdictions, including unfair dismissal and general protections claims, meaning employers must have a lawful and valid reason and comply with procedural fairness requirements when terminating employment;
• Workers who are engaged as "independent contractors" will be covered by the definition of “employment” under the FW Act, such that it will become relevant to consider the "real substance, practical reality and true nature" of the relationship, and factors such as control, hours of work, the ability to delegate, expectation of ongoing work, financial risk and method of payment will all be considered in a multi-factorial assessment; and
• Employers may also have obligations regarding income tax, superannuation, payroll tax and insurance obligations under applicable state and territory legislation.

In light of these developments, Australian employers engaging overseas workers should undertake the following:

• Review existing engagement arrangements to assess whether overseas workers may be characterised as Australian based employees under the FW Act;
• Consider how contracts are issued to and accepted by overseas workers and whether there are alternative contracting arrangements that could be implemented; and
• Explore alternative engagement models, such as establishing a local entity in the worker's home jurisdiction or using an employer of record.

The engagement of offshore labour by Australian businesses is an area of increasing focus. With the FWC having applied these principles to award compensation to overseas-based workers in two recent unfair dismissal cases, employers should be reviewing their offshore engagements as a priority.

If you require assistance with reviewing your offshore workforce arrangements, assessing the risks associated with overseas worker engagements, or implementing lower-risk engagement models, please contact us.

Resources:

[1] Doessel Group Pty Ltd v Pascua [2025] FWCFB 43 (find the decision ⁠here)

[2] Sanderson v Brightest Australia Pty Ltd [2026] FWC 1633 (find the decision ⁠here)

The views expressed in this article are general in nature only and do not constitute legal advice. Please contact us if you require specific advice tailored to the needs of your organisation.