The ethics of outsourcing are under the spotlight after a recent Fair Work Australia decision found that a Filipino worker employed by a Queensland law firm was wrongly classified as a contractor.
Joanna Pascua worked 38 hours a week for the firm, was paid through an Australian entity, and received over 80% of her income from one employer, all while being treated as an independent contractor. Fair Work ruled she met the criteria of a full-time employee, setting a precedent that location does not exempt businesses from their legal responsibilities.
Read more about the case here:
This Filipino woman struck a blow against Australian businesses ‘exploiting’ offshore workers – ABC News
This ruling sets a clear precedent: location doesn’t remove an employer’s responsibility under Australian law.
“Too many businesses rely on outdated or oversimplified rules, like the 80/20 income test, thinking it shields them from compliance risk. But that’s a tax guideline, not a legal defence,” says Paul Findlay, Director of Real Estate of Cloudstaff Australia.
“If your offshore worker is under your control, doing regular hours, working within your systems, and only earning income from your business, that’s an employee relationship, not a contractor one. Fair Work Australia has made it clear. If you get it wrong, you could be liable for backpay, leave entitlements, and even penalties.”
As offshore hiring becomes more common, experts warn that many businesses are unknowingly breaching employment laws by misclassifying full-time offshore workers. The case has sparked national debate, with calls growing for more ethical and compliant outsourcing practices.
Cloudstaff, a leading offshore staffing provider, says this ruling is a wake-up call for the industry. “We’ve long advocated for ethical outsourcing, treating offshore staff as genuine employees with proper protections and working conditions,” said CEO Lloyd Ernst. “It’s not just the right thing to do, it’s essential for long-term success and legal compliance.”
Cloudstaff hires clients’ offshore team members as full-time employees in the Philippines. This ensures both clients and employees are protected.
Employers are now being urged to review their offshore staffing arrangements and ensure they align with Australian law, regardless of where their team members are located.