Workers outside Australia can access unfair dismissal protections, according to FWC

It is a timely reminder for employers to be cautious about how they engage overseas workers, and to be aware of what entitlements overseas employees can claim.

The case involved a Philippines national who was hired by an Australian company based in Queensland to perform paralegal work from her home in the Philippines, on behalf of an Australian law firm.

She started work in July 2022 under an ‘independent contractor’s agreement’ that had an unsigned ‘employee non-disclosure agreement’ attached. In March 2024, her contract was terminated, and she made an unfair dismissal claim to the Fair Work Commission (FWC) under the Fair Work Act 2009 (Cth).

The employer, Doessel Group Pty Ltd (Doessel), attempted to have the worker’s claim dismissed on the grounds that she was an independent contractor, not an employee, in response.

The FWC initially found that the worker was an employee, not an independent contractor, and dismissed the objection. Doessel subsequently appealed the decision.

Apart from the perennial issue of whether a worker is an employee or independent contractor, this case highlights the risks for local employers engaging overseas based workers if they assume local employment law does not apply.

Not only is the employer at risk of unfair dismissal and other statutory claims arising from dismissal of employment, as in this case, but they may also be subject to civil penalty claims for failing to pay minimum pay rates and to provide other employment benefits such as leave entitlements. For example, the evidence in this case was that the employee was paid A$720 per week, when, at the time of her dismissal, the minimum weekly wage in Australia for a full-time employee was A$882.80. Employers in that situation may face underpayment claims, including interest, and be subject to significant monetary penalties.

To minimise the risks, employers considering using overseas-based workers in their Australian businesses should ensure they have planned those arrangements carefully and obtained legal advice on the applicable employment law, among other aspects.

Overseas employees and unfair dismissal claims

Although Doessel’s appeal was ultimately refused, the decision – by the full bench of the FWC – gives employers guidance and clarity on the criteria for determining whether an employee based and working overseas can bring an unfair dismissal claim under the Fair Work Act 2009 (Cth).

An unfair dismissal claim is available to a former employee who was a ‘national system employee’, which is an individual employed by a ‘national system employer’. A national system employer includes a constitutional corporation, including Australian trading corporations such as Doessel.

Although the Fair Work Act has domestic limitations and is directed at employment with a relevant connection to Australia, some parts of it are expanded extraterritorially by the Fair Work Regulations 2009 (Cth). For example, section 34(3) allows regulations to be made about “any Australian employer” and “any Australian-based employee”. For unfair dismissal claims, regulation 1.15F(5) provides that the operation of the Fair Work Act extends to anywhere in the world for an Australian-based employee in relation to their Australian employer.

An Australian-based employee is one whose primary place of work is in Australia or who is employed by an Australian employer, whether the employee is based in Australia or elsewhere, unless the employee is engaged outside Australia to perform work outside Australia.

Under this definition, when the employee’s work is performed wholly outside Australia, the only question is whether they have been “engaged” outside Australia. “Engaged” in this context means the “formation of the employment contract”, meaning the location where the contract of employment was made is the relevant factor to look at.

A previous decision by FWC, found that when an employment contract is made over email, which is often the case with overseas employees, the “formation” of the contract happens when the email accepting the offer of employment is received. This means that the contract is formed in the location where the employer receives the email from the employee accepting the offer, which is typically when they attach the signed contract. For employers with human resources or management teams located in Australia, who are exchanging signed copies of contracts with employees overseas via email, this means that the employee will be “engaged” in Australia even though they may have never set foot in Australia.

Ultimately, it is clear from this analysis that overseas-based employees working for an Australian employer may be entitled to bring an unfair dismissal claim. This conclusion was also reached in similar decision in 2023, which found that an overseas employee engaged by email was entitled to bring a general protections claim under the Fair Work Act in Australia.

Australian employers considering employing people overseas should review how they engage those individuals. While using email for employment contracts is common, efficient and convenient, it may result in unintended consequences and employers should give consideration to alternatives when hiring foreign workers – for  example by using local agents to facilitate the signing of the contract in the country where the employee is based, rather than directly via email.

The FWC said that the relevant evidence about how and where communication of the employee’s acceptance of Doessel’s offer occurred was unclear because the issue had not been argued at first instance.

Accordingly, the FWC did not decide on that point. When the claim went to a third hearing, the FWC ultimately found the employee had been unfairly dismissed and awarded her 15 weeks’ compensation.

Co-written by Andrew Herlinger of Pinsent Masons.