Australian ruling extends Fair Work Act to overseas contractors, impacting outsourcing
MELBOURNE, AUSTRALIA — In a groundbreaking decision, Fair Work Australia accepted an unfair dismissal claim from a Filipino legal assistant contracted by an Australian business.
This ruling, handed down on September 26, 2024, could significantly impact small businesses that directly employ or contract overseas workers online.
Case details
The case involved an Australian company that terminated the engagement of a Filipino worker due to underperformance. The worker, based in the Philippines, filed an unfair dismissal claim in Australia.
Surprisingly, the Fair Work Commission not only agreed to hear the case but also classified her as an employee rather than an independent contractor.
Specific details of the ruling
The ruling was decided on 26 Sep 20-24, and the Commission found in favor of the Filipina worker, Pascua.
Critically, the Commission ruled that (1) Pascua was indeed a full-time employee, not an independent contractor, as the contract stated, and (2) the ruling implicitly confirmed that Pascua has full protection under Australian labor laws. Also, the commission found that for the work that PAscua was doing, she should be paid a minimum wage of at least AUD$30.95/hr.
The Commission is yet to make a decision on whether Pascua’s dismissal is considered “unfair dismissal” or not. This is still being deliberated. However, the core items of whether she is (1) a full-time employee, and (2) protected under Australian labor laws, is already decided in her favor.
>> See the official decision document from the Australian Fair Work Commission.
Implications for Australian businesses
Business mentor and outsourcing expert Mike O’Hagan highlighted the implications of this decision, stating, “This means any Filipino you have engaged as an Independent Contractor can use Fair Work Australia to enforce the Australian Minimum Conditions – including wages.”
This decision suggests that independent contractors in the Philippines are no longer shielded from Australian industrial relations laws. Australian businesses directly contracting overseas workers may face potential legal challenges and should not ignore this development.
However, O’Hagan noted that businesses employing overseas-owned business process outsourcing (BPO) firms to manage international workers remain unaffected, emphasizing the advantages of collaborating with outsourcing firms for overseas operations.
Understanding the Fair Work Act
The Fair Work Act is Australia’s primary legislation governing workplace relations. It sets minimum standards for employment conditions, including wages, working hours, and dismissal processes.
This recent decision indicates that the Act’s reach may extend beyond Australian borders when businesses directly engage foreign workers.
Derek Gallimore, Founder and CEO of Outsource Accelerator, offered a critical perspective on the ruling’s implications for those using freelance offshore workers.
“This ruling has dramatic implications for people who use ‘freelance’ offshore workers. The case determined that a Filipino worker (living in the Philippines) would be treated the same as an Australian worker and could expect compensation for unreasonable employment practices,” he explained.
He pointed out that many have assumed labor laws do not apply when hiring internationally, emboldened by the difficulty of policing and enforcing such laws across borders. “However, this ruling is hitting back at that assumption.”
Gallimore also raised the question of whether other countries might follow suit with similar rulings and noted that businesses are protected from these issues if they hire through an outsourcing company, which formally employs its staff in accordance with local labor laws.
A new era for global employment
This development marks a pivotal shift in how global employment is managed. It underscores the need for businesses to reassess their employment practices and ensure compliance with international labor standards.
As global employment becomes more mainstream, such legal precedents could lead to more comprehensive international labor protections.
Other relevant rulings
Also, another relevant decision, from 6 September 2024, exists between a Bosnian digital nomad who was a developer for an Australian business. The Bosnian developer was also confirmed to qualify for protection and equal treatment under Australian labor laws.
