This extract from a Fair Work Commission appeal, hears by a very senior Full Bech contains a summary of the legal principles which are at the heart of the important issues whether a person is an employee or contractor and then whether an employer is a national system employer.
“Employee or contractor
[25] We turn first to consider the issue determined by the Deputy President, namely, whether Ms Pascua was engaged as an employee or an independent contractor. With respect to the employee/contractor question, we do not believe there is a sufficiently arguable case of appealable error to justify permission to appeal being granted or that there is any issue of general importance or significance to make it in the public interest to grant permission to appeal.
[26] Two of the issues raised in the appeal can be addressed at the outset. First, Doessel Group contends that the Deputy President erroneously applied amended provisions of the Act which were not applicable to the present case. The submission is without merit. The method to be used to ascertain the ordinary meaning of the terms “employee” and “employer” for the purposes of the Act has now been amended by adding s 15AA. Those amendments were made by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) and commenced on 26 August 2024. However, the Act as it existed prior to those amendments applies to an application made, or proceedings on foot at the commencement of the amendments as well as an application for review of, or an appeal relating to, such an application or proceedings.21 As such, s 15AA did not apply to the proceedings at first instance and does not apply to this appeal.
[27] However, there is nothing to suggest that the Deputy President applied s 15AA in assessing whether Ms Pascua was engaged as an employee or independent contractor. The Deputy President expressly referred to the approach in Personnel Contracting and Jamsek and indicated that he had applied the approach dictated by those decisions. As we understand the submission, Doessel Group suggests that the Deputy President’s reference to whether Ms Pascua was performing work in her own business or working in its business suggests that he applied s 15AA. We do not accept that submission. The extent to which the putative employee can be seen to be working in their own business as distinct from the putative employer’s business was a matter which the members of the High Court thought was significant in Personnel Contracting and Jamsek.22 The Deputy President did not apply s 15AA.
[28] Second, Doessel Group’s submissions assume that the fact that Ms Pascua performed work in the Philippines is relevant to the legal character of the relationship between the parties. It is not. There is nothing preventing an Australian employer engaging an employee under a contract of employment to perform work overseas. Sections 34(3) and 35 of the Act specifically address the application of the Act in that circumstance. Except perhaps to the extent that the location of the work contemplated by the contract might affect the degree of contractual control or the nature of the work contemplated by the contract, the fact that Ms Pascua in fact performed work in the Philippines is irrelevant to the character of the relationship created by the Independent Contractor’s Agreement.
[29] Otherwise, the approach required by the majority of the High Court in Personnel Contracting and Jamsek is clear. In short, at least where the rights and duties of the parties are “comprehensively committed to a written contract” the validity of which is not challenged on the basis it is a sham and the terms of which have not been varied, waived or the subject of an estoppel, the rights and obligations established by the contract are determinative as to the legal character of the relationship.23 The characterisation of the relationship does not require or involve a “wide ranging review of the entire history of the parties dealings”.24 Except to the extent there is a contention that the contract was varied or an estoppel or waiver has arisen, the subsequent conduct of the parties does not bear upon the legal nature of the relationship.25
[30] Once the terms of the contract have been ascertained, it is necessary to characterise the relationship created by the contract. Two considerations will often be critical: the extent to which the putative employer has the right to control how, when and where the putative employee performs the work; and the extent to which the putative employee can be seen to be working in their own business as distinct from the putative employer’s business.26 The way that the contractual terms address the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holidays, the delegation of work, and where the right to exercise direction and control resides may also be relevant to whether the relationship is one of employer and employee.27
[31] In our opinion, there is nothing to suggest that the Deputy President did not properly apply this approach or that the conclusion he reached was not correct. Many of the matters raised by Doessel Group impermissibly sought to rely on the manner in which the contract between the parties was performed rather than the legal rights and obligations it created. Doessel Group also relied on the description of the legal character of the relationship in the contract itself. The “label” which the parties may have chosen to describe their relationship is not determinative of, or even relevant to, that characterisation.28
[32] The Deputy President appropriately considered the terms of the Independent Contractor’s Agreement. The most significant aspects of the contract are that the nature of the duties it contemplated did not suggest Ms Pascua was operating her own business, the key performance indicators established a high degree of control over the performance of work (including regulating the number of tasks, hours of work and amount of disbursements, a requirement to notify a supervisor if work could not be completed and the performance of ad hoc tasks as directed) and provision for the payment of an hourly rate of salary. Other aspects of the contract referred to by the Deputy President were perhaps of debatable relevance, such as the level of pay. However, we do not believe there was any error in the overall assessment made by the Deputy President. We believe it was correct. There is no reason to grant permission to appeal with respect to the finding that Ms Pascua was engaged as an employee rather than an independent contractor.
National system employee
[33] A further issue arises in relation to the jurisdiction of the Commission to determine Ms Pascua’s application. Ms Pascua lives and works in the Philippines. It appears she has never, relevantly at least, visited or performed work in Australia. These facts might be thought to suggest she might not be an employee to whom the Act applies. The Deputy President understandably raised that issue with the parties at first instance. The decision of the Deputy President records as follows:
[5] The issue was also raised that Ms Pascua worked in the Philippines. The issue being that she may not be a national system employee. Section 380 provides that the protection from unfair dismissal in Part 3-2 of the Act apply to national system employees. Submissions were invited on this point. Doessel was content to rely on its argument that there was no employment and so the issue did not arise. For completeness in the absence of any argument to the contrary I am satisfied for the purposes of s 14 of the Act that Doessel is a constitutional corporation so far as it employs persons and that if Ms Pascua is an employee then she was, for the purposes of s 13, employed as described in section 14 by a national system employer and meets the description of national system employee.
[34] As the Deputy President indicated, Doessel Group did not press a separate argument that Ms Pascua was not a national system employee and, as a result, could not make an application for an unfair dismissal remedy. In those circumstances, the Deputy President indicated that he was satisfied that Ms Pascua was a national system employee for the purposes of s 13 of the Act.
[35] The application of Part 3-2 of the Act is as follows. Section 394(1) provides that a person who “has been dismissed” may apply to the Commission for an order granting an unfair dismissal remedy. A person has been “dismissed” for the purposes of s 386(1), relevantly, if the person’s employment with his or her employer has been terminated on the employer’s initiative or the person resigned from his or her employment, but was forced to do so because of the conduct, or a course of conduct, engaged in by his or her employer. Section 380 provides that, for the purposes of Part 3-2, “employee” means a national system employee and “employer” means a national system employer.
[36] The terms “national system employee” and “national system employer” are defined in ss 13 and 14 of the Act. There is no doubt that Doessel Group is a national system employer for the purposes of s 14(1)(a) in that it is at least a constitutional corporation in the sense that it is a trading corporation for the purposes of s 51(xx) of the Commonwealth Constitution. In a simple sense, Ms Pascua, to the extent she was employed by Doessel Group, fits within the concept of being a national system employee set out in s 13 in that she is a person employed by a national system employer.
[37] There are, however, territorial limits to the operation of the Act. The subject matter of the Act is employment and, broadly speaking, it is directed at employment which has a relevant connection to Australia. Generally, s 21(1)(b) of the Acts Interpretation Act 1901 (Cth) requires that, in the absence of contrary intent, the Act be construed to apply to employment relationships that have a sufficient connection to Australia so as to justify the conclusion that the employment is one that is in and of Australia.29
[38] Certain parts of the Act are given extraterritorial operation by regulation. Section 34(3) permit regulations to be made extending the application of the Act, or specified provisions of the Act, outside the outer limits of the exclusive economic zone and the continental shelf in relation to “any Australian employer” and “any Australian based employee”. Regulation
1.15F(5) of the Fair Work Regulations 2009 (Cth) provides in relation to Part 3-2:
(5) For subsection 34(3) of the Act, Part 3-2 of the Act, and the rest of the Act so far as it relates to that Part, are extended to an Australian-based employee in relation to the employee’s Australian employer in relation to all of the area outside the outer limits of the exclusive economic zone and the continental shelf.
Note: Part 3-2 of the Act relates to unfair dismissal.
[39] As such, Part 3-2 is extended to operate with respect to any Australian-based employee in relation to the employee’s Australian employer without territorial limitation. The concepts of an “Australian-based employee” and “Australian employer” are dealt with in s 35 as follows:
35 Meanings of Australian employer and Australian-based employee
(1) An Australian employer is an employer that:
(a) is a trading corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(b) is a financial corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(c) is the Commonwealth; or
(d) is a Commonwealth authority; or
(e) is a body corporate incorporated in a Territory; or
(f) carries on in Australia, in the exclusive economic zone or in the waters above the continental shelf an activity (whether of a commercial, governmental or other nature), and whose central management and control is in Australia; or
(g) is prescribed by the regulations.
(2) An Australian-based employee is an employee:
(a) whose primary place of work is in Australia; or
(b) who is employed by an Australian employer (whether the employee is located in Australia or elsewhere); or
(c) who is prescribed by the regulations.
(3) However, paragraph (2)(b) does not apply to an employee who is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories.
[40] As we have said, there is no reason to doubt that Doessel Group is an Australian employer for the purposes of s 35(1)(a) in that it is a trading corporation. Ms Pascua is an Australian-based employee for the purposes of s 35(2)(b) in that she is employed by an Australian employer. The only question that arises is whether the exclusion in s 35(3) applies, that is, whether Ms Pascua is “an employee who is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories”.
[41] Section 35(3) has been considered in a number of authorities. In Munjoma v Salvation Army (NSW) Property Trust as Trustee for the Social Work [2013] FWC 3337 (Munjoma), Hatcher VP (as his Honour then was) expressed the view that:
[38] The exclusion in s.35(3) has two limbs, both of which must be satisfied in order for the exclusion to operate. The first is that the employee is “engaged outside Australia and the external Territories”. The second is that the engagement is to “perform duties outside Australia and the external Territories”. It is clear that the second limb applies, since Dr Munjoma’s duties under her contract of employment were to be performed primarily if not wholly in Nauru. The question therefore is whether it is manifest that the first limb also applies – that is, was Dr Munjoma “engaged” outside of Australia?
[42] That is, for a person who otherwise falls within the definition of being an “Australian- based employee” by operation of s 35(2)(b) to be excluded by s 35(3), the person must have both been “engaged outside Australia” and engaged to perform work outside Australia and its external Territories.30 As was the case in Munjoma, the second limb is satisfied in this case. Although her work concerned clients of the business in Australia, Ms Pascua’s work appears to have been entirely performed outside of Australia.
[43] As outlined above, the question of whether Ms Pascua was “engaged outside Australia” was not considered in detail by the Deputy President because the parties did not address this question at first instance. Doessel Group contended in its written submissions on appeal that, in order for the Act to apply, an appropriate connection aligning the employment relationship sufficiently with Australia must be demonstrated and the work performed was not of itself determinative. Doessel Group submitted that because Ms Pascua is not an Australian resident and the contract of employment was made outside Australia and regulated “by the laws of an external jurisdiction”, the employment relationship does not have a sufficient connection with Australia. Doessel Group repeatedly referred to the fact that Ms Pascua performed work in the Philippines. However, those assertions appeared to be advanced substantially in support of its contention that Ms Pascua was an independent contractor rather than in support of a discrete contention that, even if she was an employee, Ms Pascua was not entitled to apply for an unfair dismissal remedy. It conflated the question of the connection of the engagement with Australia and the question of whether Ms Pascua was an employee or independent contractor.
[44] Ms Pascua addressed the question of whether she was a national system employee in her written submissions in the appeal by reference to Gautam Parimoo v LakeResources N.L. [2023] FWC 2543 (Gautam), a decision to which we refer below. Mr Moriarty, for Ms Pascua, submitted that an issue of importance is raised in the appeal by reason of the case being an example of the engagement of offshore labour by Australian businesses in what he described as a “grey market” for labour. Mr Moriarty indicated that Ms Pascua does not, in those circumstances, oppose permission to appeal being granted and affirmatively submitted that it is in the public interest for the Full Bench to determine the appeal. Mr Moriarty submitted, however, that the Full Bench should be satisfied that Ms Pascua was a national system employee prior to her dismissal and that she was able to apply to the Commission for an unfair dismissal remedy.
[45] The question of whether an employee engaged by an Australian employer, but performing work outside of Australia, is an employee covered by the Act has been considered in a number of authorities. In Cohen v iSoft Group Pty Limited [2012] FCA 1071 (Cohen), the question as to whether the Act applied to employment where the work was being performed outside Australia was raised, but was not ultimately determinative. Flick J briefly addressed submissions on this question but considered that it was prudent to express no more than “very tentative views”.31 His Honour was satisfied the employer in that case fell within the definition of s 35(1)(a) of the Act, but was not satisfied that the employee fell within s 35(2)(b) by reason of s 35(3), proffering that if “engaged” in s 35(3) of the Act was a reference to the physical location where the agreement was executed, the place of “engagement” in that case was Singapore, such that the exclusion in s 35(3) arose.32
[46] In Munjoma, the concept of an employee being “engaged outside Australia” was construed by Hatcher VP (as his Honour then was) as referring to the place where the contract
of employment of the employee was formed. His Honour considered the use of the word “engaged” in s 35(3) was ambiguous and acknowledged that the concept of an employee being “engaged” was capable of being understood as referring to the “hiring” of the employee by way of the formation of the contract of employment.33 His Honour noted that “an argument to that effect was adverted to in Cohen v iSoft Group Pty Limited, but did not need to be determined” and concluded that an approach which interprets “engaged outside Australia” as a reference to the location of the formation of the contract conforms to the ordinary meaning of the word “engaged” and gives the first limb of s 35(3) work to do. His Honour said:
[45] I do not find the respondent’s argument that the expression “engaged outside Australia and the external territories” refers to the performance rather than the formation of the employment persuasive. As earlier stated, the exclusion has two limbs. The second limb clearly refers to the purpose or function of the engagement of the employee as being to perform duties overseas. That is, it refers to the location where the employee’s obligations under the contract of employment are to be performed. That being the case, the first limb of the exclusion – “engaged outside Australia and the external Territories” – must have some separate and different work to do. The respondent’s approach does not give it any separate work to do; it takes the first limb as also referring to the location of the performance of duties under the employment contract also. On that approach, the second limb becomes unnecessary verbiage.
[46] An approach which has the first limb of the exclusion referring to the location of the formation of the employment contract gives it separate and distinct work to do. It conforms to the ordinary meaning of the word “engaged”. And because an employment relationship formed in Australia between an Australian employer and a person located in Australia at that time can be characterised as having a “substantial connection to Australia”, it conforms to the intention of the legislature as stated in paragraph 168 of the explanatory memorandum.
[47] As to “formation”, it may be accepted that a contract is formed upon receipt by the offeror of communication of its acceptance by the offeree. Formation of a bilateral contract generally requires the receipt of a communication of acceptance in order to be effective.34 Where a contract is formed by means of email communications, the position that appears to have been adopted is that the contract is made where the electronic communication is received.35
[48] That question was considered in Winter v GHD Services [2019] FCCA 775; (2019) 285 IR 331 (Winter). Heffernan J considered that the decision in Munjoma established that engagement outside Australia for the purposes of s 35(3) of the Act requires the identification of the location of formation of the contract. Citing Chitty on Contracts,36 her Honour recorded that a contract is formed on the communication of the acceptance to the offeror and that it has no legal effect until that occurs, with communication normally requiring some act to bring the acceptance to the attention of the offeror. In circumstances where the contract of employment in question was signed in the United States and sent by email to Australia, her Honour considered the location of the formation of the contract was Australia on the basis that the contract was formed only when communication of its acceptance by email was received. That had occurred in Australia.37
[49] In Gautam, Boyce DP considered the findings made in Winter to be on point. The Deputy President found that the applicant in that matter was engaged by the respondent when the employment contract was made, and that the employment contract was made in Australia because acceptance of the offer of employment was communicated by emailing a signed copy
to the respondent in Sydney. The Deputy President concluded that the Electronic Transactions Act 2000 (NSW) applied to the formation of an employment contract and that s 13B of that Act meant that an electronic communication is taken to have been received at the place where the addressee has its place of business which was, in that case, Sydney.38 The consequence was that the employee was an “Australian-based employee” for the purposes of s 35(2)(b) and not engaged “outside Australia” for the purposes of s 35(3).
[50] The application of the Act to employees performing work for an Australian employer outside of the country is an important issue. The question of whether at least parts of the Act apply to an employee who is engaged under a contract of employment formed by electronic communication of acceptance of the contract to an employer located in Australia even if the employee performs work outside of Australia has potentially significant implications. However, it is not appropriate for the Full Bench to express a final view on the question in the present appeal given the manner in which the proceedings were conducted at first instance.
[51] The difficulty is that the evidence as to Ms Pascua’s engagement by Doessel Group is unclear. The version of the Independent Contractor’s Agreement that was in evidence before the Deputy President is unsigned. A document entitled “Employee Non-disclosure Agreement” was signed by Ms Pascua on 21 July 2022. The Employee Non-disclosure Agreement is Annexure B to the Independent Contractor’s Agreement. Mr Moriarty asked the Full Bench to infer that the Employee Non-disclosure Agreement must have been signed by Ms Pascua in the Philippines and communicated to Doessel Group in Australia by email and that the Independent Contractor’s Agreement was not signed in error. If that is the case, he submitted that the contract was formed in Australia and, as such, Ms Pascua was not engaged outside Australia for the purposes of s 35(3) of the Act.
[52] It may be that the logical inference to be drawn is that Ms Pascua must have communicated acceptance of the contract by email. However, direct evidence of the formation of the contract was not given at first instance. That is unsurprising given that the contentions advanced by Doessel Group was directed at the employee/contractor question. The manner in which Ms Pascua communicated her acceptance of the Independent Contractor’s Agreement is likely to be capable of being the subject of direct evidence. It is not appropriate for the Full Bench, in hearing an appeal, to make inferences in relation to factual matters that are capable of being resolved by direct evidence.
[53] In the circumstances, although the question of the application of Part 3-2 of the Act to employees of Australian employers performing work overseas is an important one, we do not believe it is in the public interest to grant permission to appeal in relation to that question in this matter. The issue was not directly argued before the Deputy President and the evidence is incomplete. It may be necessary for the Deputy President to return to this question in resolving Ms Pascua’s application to satisfy himself that the Commission has jurisdiction. The Deputy President will, at that point, have the opportunity to hear direct evidence as to the manner in which Ms Pascua was engaged and hear substantive argument in relation to whether Ms Pascua is a national system employee for the purposes of Part 3-2 of the Act, having regard to the terms of ss 34 and 35.
Conclusion and disposition
[54] For the reasons set out above, the Full Bench orders that permission to appeal is refused.”
Doessel Group Pty Ltd v Pascua [2025] FWCFB 43 delivered 21 February 2025 per Gibian VP, Clancy DP and Roberts DP