Written by PLT Student, Grace Hart, and Managing Principal, Jennifer Tutty
The Fair Work Commission’s (the Commission) recent decision in Pascua v Doessel Group Pty Ltd [2024] FWC 2669 (Pascua) affirmed that the rights and entitlements entrenched in the Fair Work Act 2009 (Cth) (the Act) may extend to workers from countries other than Australia in cases of contractor misclassification.
The Facts
Ms Pascua was engaged to perform work as a legal assistant by Doessel Group Pty Ltd (Doessel) under contract. The contract, titled “Independent Contractor’s Agreement”, was dated 21 July 2022. Ms Pascua worked remotely from her home in the Philippines, while Doessel was operated from Queensland, Australia. On 20 March 2024 Doessel made allegations via email that Ms Pascua had breached her contract; and subsequently terminated Ms Pascua in the same manner.
Ms Pascua lodged an application for an unfair dismissal remedy pursuant to section 394 of the Act. Doessel argued that Ms Pascua was not dismissed within the meaning of section 386 of the Act because she was never an employee of the Doessel Group. Rather, Ms Pascua had been engaged by Doessel as an independent contractor.
The Law
In CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Pty Ltd and Jamsek [2022] HCA 2 (Jamsek}, the High Court held that where the relationship between the parties is regulated by a wholly written contract which is not a sham or otherwise ineffective, the question of contractor misclassification is to be determined solely by reference to the rights and obligations under that contract. The law shifted away from the common law approach adopted by the High Court in Personnel Contracting and Jamsek in August 2024 with the introduction of section 15AA into the Fair Work Act (the whole of relationship test). According to the operation of section 15AA, decision-makers must now turn to the totality of the relationship between the putative employee and the putative employer in order to ascertain the true nature of the agreement between the parties.
The introduction of section 15AA into the Act reverses the decisions of the High Court in Personnel Contracting and Jamsek. Constitutionally covered businesses must now use the whole of relationship test to determine whether a worker is an independent contractor or an employee. Application of the test under section 15AA includes an assessment of the real substance, practical reality and true nature of the working relationship; and consideration of all of the relationship between the putative employee and putative employer, including the terms of the contract and how the contract is performed.
When are workers working overseas covered by the Fair Work Act 2009 (Cth)?
In Pascua, the Commission didn’t apply the whole of relationship test under section 15AA of the Act. Instead, the Commission conducted an assessment of the rights and duties created by the written contract between Ms Pascua and Doessel in order to determine whether a relationship of employment existed between the two parties.
The Commission held that the terms of the written contract indicated that the relationship between Ms Pascua and Mr Doessel was not one of independent contractor and principal. Rather, Ms Pascua was an employee of Doessel. The Commission reasoned that on a finding of a relationship of employment between the parties, the protections entrenched in the Act could properly extend to Ms Pascua. This is because the Doessel Group was a national system employer; making Ms Pascua a national system employee who was covered by the National Employment Standards and the Act, notwithstanding the fact that she performed the entirety of her work remotely from her home in the Philippines.
On the reasoning of the Commission, an overseas worker employed by a national system employer may be entitled to the rights and protections under the Fair Work Act 2009 (Cth) where the relationship between the parties can properly be regarded as one of employee and employer.
The Commission outlined the following reasons for their decision that the relationship between the parties was a relationship of employment:
- –The contract: Doessel relied on the terms of the contract as evidence of an agreement between independent contractor and principal. The contract listed Ms Pascua as “the Independent Contractor”, and the Doessel Group Pty Ltd as “The Company”. However, elsewhere in the document the contract referred to Ms Pascua as an “employee”. The Commission was firm in their stance that the title of the contract and the way in which the terms offered fluctuated descriptions of the parties were not determinative of any legal relationship;
- –Company equipment: At the commencement of the contract between Ms Pascua and Doessel, Ms Pascua was provided with a pbx phone account which identified her as calling from the MyCRA Lawyers office. Ms Pascua was also provided with a MyCRA Lawyers signature block on her emails, which the Commission reasoned was suggestive of Ms Pascua having performed work in a business other than her own;
- –Nature of work: The Commission explained that an independent contractor performs work of a calibre that requires a trade, profession or distinct calling. Ms Pascua performed paralegal work for MyCRA Lawyers, which the Commission explained did not require a trade, profession or distinct calling;
- –Expectation of ongoing work: According to the terms of the contract, Ms Pascua’s terms of work were ongoing unless terminated. The Commission explained that an expectation of ongoing work between parties is suggestive of a relationship of employment;
- –Mode of renumeration: In the reasons for their decision, the Commission explained that the mode of renumeration by which Doessel paid Ms Pascua, which included weekly payments calculated on an hourly rate, was an indication that the relationship between the two parties was a relationship of employee and employer;
- –Level of renumeration & comparable Industrial Agreements: The Commission sought to draw stark comparison between the description of the work to be performed by Ms Pascua under contract with the work performed under the relevant descriptor in the Legal Services Award 2020 (Levels 2 and 3, Legal Clerical and Administrative). While the descriptors could be compared; the Commission reasoned that Ms Pascua’s very low rate of pay under contract ($18, below the Australian minimum wage) evidenced Doessel’s lack of intention to engage Ms Pascua as an independent contractor performing specialist services. Conversely, the Commission reasoned that the low rate of pay under contract which was comparable with the descriptor of legal services in the Australian Award meant that Ms Pascua was engaged on an hourly basis to provide work as directed, consistent with a relationship of employment.
Are There Any ‘Sham Contracting’ Risks Associated With Hiring Overseas Workers as Contractors?
Sham contracting may occur where an employer knowingly tells or makes a representation to a worker that they’re an independent contractor when in fact the relationship between the employer and worker is a relationship of employment. This proposition stands unless the employer can prove that when the representation was made; the employer held a reasonable belief that the contract was a contract for services. Where a business or individual is found to have engaged in sham contracting, the courts may exercise their discretion to impose a civil penalty on that business or individual pursuant to section 357 of the Act.
In Pascua, the claimant didn’t raise sham contracting as a live issue. However, following the Commission’s decision and with the addition of the whole of relationship test under section 15AA to the Act, there seems to be little scope for a national system employer to invoke the concept of ‘reasonable belief’ under section 357(2) as a defence to a sham contracting. This seems especially so where the legal arrangement was made with an overseas worker and the concept of excusing ‘reasonable belief’ in regard to sham contracting and exploitation likely lies outside the public interest.
National system employers can no longer rely on a well-drafted agreement to contract-out of paying overseas workers their entitlements under Australian law.
What are the Potential Legal Issues an Australian Business May Face if They Incorrectly Hire an Overseas Worker When They Should be an Employee?
In Personnel Contracting and Jamsek, the High Court emphasised the importance of committing the parties’ respective rights and obligations to a written document. On the addition of section 15AA to the Fair Work Act (Cth), the position of the High Court was reversed, and in the course of determining the legal relationship between a putative employer and putative employee; decision-makers are now expected to apply the whole of relationship test.
This means that Australian businesses who hire overseas workers need to shift their focus from the terms of their contracts for services to how these contracts are performed in practice. Where practice evinces a relationship of employment and an overseas worker has been incorrectly classified as an independent contractor; a national system employer may face significant issues relating to civil liability for any unpaid entitlements. This may include civil liability for underpayments. In Pascua, the Commission compared the claimant’s descriptor of work as a paralegal and rate of pay under the contract for services with the Legal Services Award 2020. The claimant was paid significantly below the Australian minimum wage and below the relevant Award rate. While not addressed in this instance, the door is open on the facts for Ms Pascua, a national system employee and full-time resident of the Philippines, to make an underpayments claim against an Australian-owned business.
Australian businesses who can be classified as national system employers and who fail to correctly classify their overseas workers as employees may also face liability for unpaid superannuation and unpaid taxes. Where the business has intentionally underpaid the employee in regard to their wages or entitlements from 1 January 2025, this may constitute a criminal offence which may result in criminal penalties.
Concluding Remarks
In Pascua, a case of contractor misclassification gave the claimant the right to pursue an unfair dismissal claim. The Commission’s decision opened the door for overseas workers to access the rights and protections under the Act where the worker is contracted to work by a national system employer; and where the relationship between the parties can be properly regarded as a relationship of employment.
For Australian businesses who choose to engage overseas workers on contracts for services, it is imperative that any agreement mirror the true nature of the legal relationship between the parties. A decision-maker who has been tasked with deciding on the substance and reality of an agreement between a putative employer and putative employee will now turn to the totality of the relationship. This means that the decision-maker will look outside of the agreed-upon terms and to post-contractual conduct in order to determine whether a worker is an independent contractor or an employee.
Further Information
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Written by PLT Student, Grace Hart, and Managing Principal, Jennifer Tutty
Published 27 May 2025.
Photo by Jack Cohen on Unsplash
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