Remote FOREIGN Workers
Many Australian employers are choosing to engage remote foreign workers located overseas to fill local vacancies. Virtual assistants from abroad often value these opportunities. Remote foreign workers offer a range of capable and enthusiastic services at hourly rates which are up to 80% below the Australian National Minimum Wage - the key appeal for many employers.
Yet, by default, the Fair Work Act 2009 (Cth) covers Australian employers and remote foreign workers, unless a clear and specific exception can be established, perhaps in the course of legal proceedings or the prosecution of the employer.
The Fair Work Act also imposes significant civil and criminal penalties which include up to 10 years imprisonment for knowingly underpaying an employee - even where the employee agrees to such an arrangement. In this article, we look at how the Fair Work Act and modern awards apply to remote foreign workers employed by Australian companies.
Australian Workplace Laws Outside Australia
Part 1-3 Division 3 of the Fair Work Act deals with the geographical application of the legislation. Section 35 contains two important definitions which extend the application of the Fair Work Act to remote foreign workers in particular circumstances.
Specifically, section 35 extends the application of the Fair Work Act to Australian Employers and their Australian-Based Employees.
Section 35 (1) defines Australian Employer to include an employer that is:
a “trading or financial” corporation (in Australia, private or proprietary limited companies are the most common type of “trading or financial” corporation); or
any other employer that carries on an activity (whether of a commercial, governmental or other nature) in Australia, in the exclusive economic zone or in the waters above the continental shelf, and whose central management and control is in Australia.
The above and a number of other criteria are sometimes described as the requisite constitutional connection.
Section 35 (2) defines an Australian-Based Employee as an employee:
whose primary place of work is in Australia; or
who is employed by an Australian employer (whether the employee is located in Australia or elsewhere);
To avoid doubt, an Australian-Based Employee is “employed by” an Australian Employer that has misrepresented employment as an independent contracting arrangement. This may amount to sham contracting under s 357 of the Fair Work Act. In other words, providing an independent contracting agreement does not alter the true character of an employment relationship, if indeed that is what exists between the employer and the worker.
Finally, s 35 (3) creates an exception whereby the Fair Work Act does not apply to an employee located outside Australia if employee is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories.
By default, the law - and regulators - will assume that the Fair Work Act and modern awards apply to Australian Employers when engaging remote foreign workers under a contract of service. However, employers may be able raise the exception as a defence in legal proceedings brought against them on the basis that the remote foreign worker was engaged outside Australia and the engagement was to perform duties outside Australia.
When is an EMployee Engaged OUtside Australia to Perform Duties Outside Australia?
Remote foreign workers are covered by the Fair Work Act and modern awards unless the two requirements or “limbs” of the exception in s 35 (3) are established. The Fair Work Act applies to the employment where either one of the limbs are not established (ie, the worker is either engaged within Australia or their duties are to be performed within Australia).
ENgaged Outside Australia
First, the exception applies if the employer engages the employee outside Australia. The Fair Work Commission has specifically considered the meaning of the term “engaged” in this context (1), which refers to the formation of the employment contract or relationship (2).
However, an employee is not engaged outside Australia simply because:
the employee is located outside Australia when they are engaged (3);
the employee signs an employment contract outside Australia (4); or
they perform duties outside Australia (which is dealt with under the second requirement or “limb” of the exclusion).
The employee is “engaged” when the employment contract is made. In Australia, the well-established, ordinary rule is that a contract is not made, nor an offer accepted, until the acceptance of the offer has been communicated. For example:
at common law, an email is communicated when it is either received in the recipient’s mailbox or actually read by the recipient (5);
a written contract can be accepted over the telephone when instantaneously communicated to the offeror (6);
acceptance via instant messaging is likely to occur when the offeror reads the acceptance.
Then again, there is an equally as well-established exception to the rule that acceptance occurs when communicated. The postal acceptance rule states that where acceptance of a contract is expected by post, the contract is formed at the time and place at which the acceptance is posted.
The Australian jurisdiction has taken a stricter approach by requiring at least that it can be inferred that the offeror intended acceptance to be available by posting it (7). Ideally, an express contractual term should provide for the application of the postal acceptance rule.
Further, in the absence of any express terms, courts have rejected efforts to extend the postal acceptance rule to any other means of communication such as phones (8), telex (9) or faxes (10).
Australian electronic transactions legislation does not resolve the issue in Australia. The Electronic Transactions Act 1999 (Cth) and the Electronic Transactions Act 2000 (NSW) provide clarity in relation to dispatch and receipt - but not communication and contract formation.
The place an employment contract is formed is a key consideration for determining where a resulting employment engagement occurs. However, the extent to which the place of formation is determinative will require further cases which test such a proposition.
Employers should assume that remote foreign workers they engage directly are covered by the Fair Work Act and modern awards absent a clear basis for establishing that the employment relationship and contractual obligations underpinning it were formed outside Australia.
An employee engaged “in Australia” to perform duties outside Australia is covered by the Fair Work Act and modern awards. Conversely, an employee engaged outside Australia to perform duties in Australia are also covered by the Fair Work Act and modern awards - and must hold a valid visa before commencing work.
Perform Duties Outside Australia
The second requirement or “limb” also requires that the employee is engaged to perform duties outside Australia. This is determined with reference to evidence of the geographical location at which the employee works.
Efforts to expand the meaning of “within Australia” to include where the work is for the benefit of the Australian Employer (11) have been unsuccessful. In fact, the “outside Australia” requirement has been established where an employee’s duties were to be performed primarily if not wholly in another country (12).
Whilst courts may apply an expanded meaning to when work is “within Australia” in future cases, the Full Bench recently declined to consider the question on appeal in relation to the facts in a particular case (13).
Independent COntracting
The recent decision on appeal in Pascua (14) did not consider whether the s 35 (3) exclusion applied. However, it did examine a case involving a worker who was purportedly engaged as an independent contractor to perform duties wholly within the Philippines.
There appears to be some preference for independent contracting among workers based in the Philippines, where it appears that such arrangements are largely regulated through the new Civil Code rather than the country’s Labour Code. The latter appears to apply to employees and can be enforced in relation to employees working abroad, where the contract was made in the Philippines (15).
On 26 August 2024, the unfair contract terms jurisdiction was introduced in Part 3A-5 of the Fair Work Act. This means that independent contractors are now able to seek a remedy in the Fair Work Commission in relation to a services contract - ie, an independent contracting arrangement. For the purpose of the new provisions, a services contract includes one where at least one of the parties is a constitutional corporation.
Consequently, foreign remote workers engaged under a services contract with an Australian company may seek a remedy involving all or part of the services contract to be set aside, amended or varied to the extent that, in an employment relationship, it would relate to a workplace relations matter, which s 536JQ lists as including:
the remuneration, allowances or other amounts payable to employees;
leave entitlements of employees;
hours of work of employees;
enforcing or terminating contracts of employment;
making, enforcing or terminating agreements (not being contracts of employment) determining terms and conditions of employment;
disputes between employees and employers, or the resolution of such disputes;
industrial action by employees or employers; and
any other matter that is substantially the same as a matter that relates to employees or employers and that is dealt with by or under the Fair Work Act or State or Territory industrial legislation.
The new unfair deactivation jurisdiction for employee-like workers engaged in a services contract with a digital labour platform operator with the necessary “constitutional connection” also appears to extend to remote foreign workers.
A key difference between employment and independent contracting is that there is no requirement that an independent contractor performs duties within Australia
What to COnsider When Engaging Foreign WOrkers?
Seek advice in relation to Australian laws in your State or Territory and the laws in the country of the worker.
Consider whether to engage the worker as an employee or independent contractor.
Employers engaging foreign remote workers as employees should consider:
a) a governing law term under which the parties submit to the laws of a non-Australian jurisdiction;
b) an express postal acceptance rule term and condition that acceptance must occur by a tracked postal service;
c) avoiding any acceptance or confirmation of the engagement via sms, email or phone; and
c) how the employee may be regulated in the jurisdiction in which they are located.
Employers engaging a foreign remote worker as an independent contractor should be mindful that if they are a private company, the relationship is likely to allow the workers to make unfair contract terms and other applications by virtue of being a party to such a contract, rather than where the contract was accepted or the location at which the duties are performed.
Contact Hennings Lawyers for a free and confidential discussion about engaging Australian and foreign workers. We assist with remote foreign worker arrangements, Australian visas for on-shore workers and can help with both employees and independent contractors.
Munjoma v Salvation Army (NSW) Property Trust as Trustee for the Social Work [2013] FWC 3337 [45]-[46]
SNG v Canvas Australia Solutions [2019] FCCA 1155 [42]
Gautam Parimoo v Lake Resources N.L. [2023] FWC 2543 [27]-[28]
Winter v GHD Services Pty Ltd [2019] FCCA 775 [5] and [10]
Hill, Simone W. B --- "Email Contracts - When is the Contract Formed?" [2001] JlLawInfoSci 4; (2001) 12(1) Journal of Law, Information and Science 46 [7]
Ibid [4]
Tallerman & Co Pty Ltd v Nathan’s Merchandise [1957] HCA 10; 98 CLR 93 [111]
Hampstead Meats Pty Ltd v Emerson and Yates Pty Ltd [1967] SASR 109
Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981] 1 NSWLR 336
Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 97325
Amit Singhal v National Australia Bank Limited [2024] FWC 2675 [26]
Munjoma v Salvation Army (NSW) Property Trust as Trustee for the Social Work [2013] FWC 3337 [38]
Doessel Group Pty Ltd v Joanna Pascua [2025] FWCFB 43 [50]
Ibid
I-People Manpower Resources, Inc v Court of Appeals G.R. No. 246410 (2023)
Note: This article is for informational purposes only and should not be taken as legal advice in any jurisdiction in Australia or any other country. You should obtain legal advice in your jurisdiction to determine how laws specifically apply to your relevant circumstances.
