A Fair Work Commission decision in 2024 reshaped how Australian businesses must think about offshore hiring. In Pascua v Doessel Group, a Filipino worker engaged as a contractor successfully argued she was in fact an employee under Australian law. The Commission found that despite being based in the Philippines, the substance of the working relationship brought her within the scope of the Fair Work Act.¹
For senior executives, this is not a minor employment dispute. It is a clear signal that offshore resourcing, if poorly structured, can create direct legal exposure in Australia.
The key shift: substance over structure
The most important lesson from the Pascua decision is this: labels do not determine legal status. The Commission looked beyond the contract title and assessed the practical reality of the relationship. Control, integration, reporting lines and day-to-day direction mattered more than geography or wording.¹
If an offshore worker operates like part of your team, reports into your managers and follows structured hours and processes, they may be considered an employee regardless of what the agreement says.²
This means Australian employment protections can apply in cross-border arrangements where the engagement has a sufficient connection to Australia.³
Why this matters for common offshore models
Many businesses assume that hiring freelancers or contractors overseas automatically reduces regulatory risk. That assumption is now clearly flawed.
The legal risks include:
- Misclassification of workers, exposing the business to employment claims
- Unfair dismissal applications under the Fair Work Act
- Liability for unpaid entitlements or minimum standards
- Reputational damage if disputes become public
Recent legal commentary has highlighted that Australian businesses engaging offshore workers must now review how those arrangements are structured and governed.² ⁴
The lowest-cost, direct-to-contractor model is often the most exposed. If the relationship resembles employment, tribunals may treat it as such.
The problem with "cheaper" freelance arrangements
Freelance or independent contractor models can be appropriate in clearly project-based, arms-length engagements. The risk arises when businesses attempt to replicate a full-time employee structure using a contractor label.
Indicators of higher risk include:
- Set working hours dictated by the Australian business
- Direct supervision by internal managers
- Integration into internal systems and workflows
- Ongoing, indefinite engagement
- Performance management structures similar to employees
Where these features exist, the contractor classification may not withstand scrutiny.² ³
For senior leadership, this shifts the conversation from “What does this cost?” to “What is our exposure if challenged?”
What compliant outsourcing looks like
The solution is not to avoid offshore talent. It is to structure it properly.
Practical steps include:
1. Conduct a classification audit
Review existing offshore arrangements. Assess control, integration and reporting structures against Australian employment law principles.²
2. Revisit contractual frameworks
Ensure agreements reflect the genuine nature of the relationship and align with both Australian law and local labour requirements.⁵
3. Consider structured employment models
Where ongoing integration is required, models such as Employer of Record or compliant managed outsourcing providers can reduce direct employment risk while maintaining operational control.⁴
4. Align legal, HR and operations teams
Cross-border engagement should not sit solely with procurement or operations. Legal and HR oversight is essential from the outset.⁵
The strategic takeaway for executives
Offshore resourcing remains a powerful strategy for capability and scale. The legal environment has not eliminated its viability. It has clarified the rules.
The Pascua decision reinforces a simple principle: if you want the control and integration of an employee, you must structure the relationship accordingly.
Short-term cost savings achieved through informal or loosely drafted contractor models may create long-term financial and reputational risk.
For boards and executive teams, governance of offshore workforce models should now sit firmly on the strategic agenda.
Rethink outsourcing with clarity and confidence
Legal exposure in offshore arrangements often comes down to how work is structured and governed.
If this has prompted you to reassess your contractor model or offshore strategy, start with our practical guide to outsourcing to the Philippines in 2026. It breaks down how to approach offshore teams with strategic intent, clarity and compliance in mind.
Footnotes
- ABC News, “Filipino woman changed game for Australia’s offshore workers”, 3 June 2025. https://www.abc.net.au/news/2025-06-03/filipino-woman-changed-game-for-australias-offshore-workers/104750996
- McCullough Robertson Lawyers, “Outsourcing overseas just became riskier for Australian businesses”, 2025. https://www.mcw.com.au/outsourcing-overseas-just-became-riskier-for-australian-businesses/
- LE Global, “Cross-border outsourcing arrangements: when workers overseas can claim unfair dismissal”, 2025. https://leglobal.law/2025/10/23/australia-cross-border-outsourcing-arrangements-when-workers-overseas-can-claim-unfair-dismissal/
- Filta Global, “The death of the direct contractor model: lessons from Fair Work Australia”, 2025. https://filtaglobal.com/blogs/the-death-of-the-direct-contractor-model-lessons-from-fair-work-australia-for-companies-hiring-filipino-staff/
- LegalVision, “Overseas outsourcing services: key legal considerations”, 2025. https://legalvision.com.au/overseas-outsourcing-services/
