A cautionary tale for businesses seeking to engage offshore workers

Real estate agencies are increasingly adopting offshoring practices to optimise their businesses. In many instances, offshoring offers access to a greater pool of skilled workers, reduced labour and operational costs, and improved capacity to expand core business hours due to the location of workers across multiple time zones. 

However, the engagement of offshore workers is not without risk.

The recent case of Pascua v Doessel Group Pty Ltd [1] demonstrates that overseas workers may well be classified as national system employees, entitling them to the minimum terms and protections available under Australian workplace laws, potentially exposing principals to significant penalties if their mischaracterisation of offshore workers leads to a contravention of Australian workplace legislation and/or industrial instruments.

Factual background

Ms Pascua filed an application for unfair dismissal in the Fair Work Commission (FWC) alleging that she had been unfairly dismissed by her employer, Doessel Group Pty Ltd t/as MyCRA Lawyers (MyCRA).

MyCRA is a Queensland-based legal firm specialising in financial credit repair services. Ms Pascua commenced working for MyCRA as a paralegal in July 2022, and had, at all times, worked remotely from her home in the Philippines.

She claimed that her employment had been unlawfully terminated on 20 March 2024 when Mr Doessel, principal of MyCRA, communicated a summary dismissal over a Skype call upon identifying an error in an email communication which she had sent to a client of MyCRA. 

MyCRA raised a jurisdictional objection on grounds that Ms Pascua was not an employee but an independent contractor and, given that she performed the entirety of her workplace services overseas, she was not a national system employee [2] such as to enjoy the protection from unfair dismissal in Part 3-2 of the Fair Work Act 2009 (Cth) (the Act).

Jurisdiction

In determining whether, or not, it had jurisdiction to hear Ms Pascua’s application, the FWC considered the nature of MyCRA’s business operations, and the terms of Ms Pascua’s retainer.

The FWC accepted, for the purpose of section 14 of the Act, that MyCRA was a constitutional corporation so far as it employs workers and that, if Ms Pascua was an employee, then she would meet the description of a national system employee such as to attract Australian workplace rights, including protection against unfair dismissal.

MyCRA argued that the written agreement in place between it and Ms Pascua was a contract for service, as opposed to a contract of service, and Ms Pascua was, therefore, a contractor and not an employee. 

However, while Ms Pascua was free to work her own hours (up to an agreed weekly cap), she was required to invoice MyCRA each week using a pro-forma electronic invoicing system which was provided by MyCRA.  She had also been provided with certain equipment by MyCRA (including a device which made it appear, when making calls from her phone, that she was located in Australia), issued with an email address which carried the domain name ‘MyCRA Lawyers’, and was required to use an electronic signature block which described her as a paralegal for MyCRA.

Ms Pascua would receive daily direction from MyCRA as to what work was to be carried out, and her performance was directly supervised by Mr Doessel. 

The FWC looked to the terms contained in the contract signed on 21 July 2022 to determine the nature of the relationship between the parties, and observed that:

• The agreement was titled ‘independent contracting agreement’ and contained a term which expressly stated that Ms Pascua agreed to perform the work solely as an independent contractor, and recorded the parties’ recognition that the contract did not create an actual or apparent agency, partnership, franchise or employment relationship;
• The contract further provided that MyCRA would not be liable for taxes, worker’s compensation levies, insurances, social security or other expenses;
• The core duties included ‘general compliance review of matters, administration, and following up clients’, which Deputy President Slevin considered to be reflective of an employment relationship given the work was to be done within MyCRA’s business rather than within an independent business being conducted by Ms Pascua;
• The daily directions issued by MyCRA and the imposition of key performance targets were held to indicate a level of control by MyCRA, and an expectation of an ongoing employment relationship;
• The rate of remuneration was stated to be AUD$18 per hour salary all-inclusive as a full-time employee, suggesting that Ms Pascua was not, in fact, operating her own business as a contractor;
• The description of the work to be performed by Ms Pascua accorded with work performed under industrial instruments whereas the rate of pay was less than the minimum prescribed Award rate, which Deputy President Slevin found to be a factor tending against a contracting relationship given that independent contractors generally charge well in excess of Award rates on account of the specialist services ordinarily provided;
• The contract did not allow Ms Pascua to assign another worker to perform the services without the express prior written approval of MyCRA.

On balance, the FWC held that Ms Pascua was not conducting her own business as an independent contractor but was, in fact, engaged on an ongoing basis as a national system employee such that she was entitled to Australian workplace protections. Accordingly, MyCRA’s jurisdictional objection was dismissed, and the matter was listed for a hearing on the merits.

Merits

When the matter came back before the FWC, Ms Pascua described the last seven months of her employment with MyCRA as ‘challenging’, claiming she had been micro-managed, heavily criticised, overworked and underpaid by the firm’s principal, Mr Doessel.

She alleged that, on 20 March 2024, she was summarily dismissed by Mr Doessel during a Skype call, without proper basis and in circumstances which were not procedurally fair.

MyCRA sought to defend Ms Pascua’s claim by arguing that she had been dismissed for reasons of underperformance and misconduct in circumstances where she had failed to follow Mr Doessel’s instructions concerning certain client correspondence, had demonstrated a lack of attention to detail resulting in errors having occurred on a number of occasions, and had unlawfully copied confidential records to her personal computer.

MyCRA’s evidence of Ms Pascua’s alleged errors was found to be insufficient to establish a sustained pattern of poor performance or demonstrative of any consequential loss to MyCRA, and there was an absence of any evidence of assistance having been provided to Ms Pascua to facilitate improvement in her performance prior.  Furthermore, it was noted that MyCRA had not issued any warnings to Ms Pascua to put her on notice that her failure to improve her performance could give rise to dismissal.

Deputy President Slevin also took into account the fact that Mr Doessel was unreceptive to Ms Pascua’s explanations of errors, was dismissive of her complaints, and had remotely accessed her computer without consent. He formed the view that, in combination, these factors illustrated that the decision to summarily dismiss Ms Pascua was made in an agitated state and without the careful consideration required of such an outcome.

Decision

It was determined that Ms Pascua’s dismissal was harsh, unjust and unreasonable. Her mistake of 20 March 2024, coupled with the earlier mistakes, did not justify dismissal and thus, there was no valid reason for dismissal. Furthermore, the dismissal process was unfair given that Ms Pascua had not been afforded any prior warning about her performance, or potential dismissal.

By way of remedy, Ms Pascua was awarded compensation in the sum of $10,800 reflecting 15 weeks’ ordinary time earnings, in lieu of reinstatement.

Key Take-Aways   

This case demonstrates the importance of ensuring that all offshoring retainers are carefully drafted to ensure that:

• the parties’ intentions are properly reflected in the written agreement (including the clear and valid characterisation of the relationship); and
• where appropriate, all terms properly comply with Australian workplace laws,

prior to the worker commencing performance of services for the benefit of the business. 

For those principals who contract with, or directly employ, overseas workers, it is recommended that they review all applicable contracts and, where appropriate, seek legal advice, to ensure that the nature of each relationship is properly depicted, and that the terms meet at least the minimum terms prescribed by Australian workplace laws and applicable industrial instruments. Insofar as practicable, all company policies and procedures applicable to domestic employees should also uniformly apply to overseas employees.

Carter Newell Lawyers are the appointed lawyers for the AON Real Estate Professional Indemnity Scheme and provide advice to Scheme members. Scheme members requiring legal advice with respect to claims and potential claims which may be covered under insureds’ Professional Indemnity policies can contact Carter Newell on CPA@carternewell.com.

Further information about Carter Newell can be found here.

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