Offshore workers – does Australian employment law apply?

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Offshore workers – does Australian employment law apply?

If employees perform work outside of Australia, does Australian employment law apply?

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If employees perform work outside of Australia, does Australian employment law apply?

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Q  We are an Australian-based company who has recently hired a number of employees to perform work overseas. Our concern is that some terms of the contract of employment could breach the National Employment Standards under the Fair Work Act. The observation has been made that because the employees perform work outside of Australia, Australian employment laws do not apply. Would each employee’s contract of employment be subject to Australian employment law or the local employment laws of the country where the work is being performed (in this case, Nauru)?

A  This will depend on whether the person is deemed an “Australian-based employee” and employed by an “Australian-based employer”.

Meaning of “Australian-based employer”

The Fair Work Act 2009 (s35(1)) defines an Australian-based employer as:
  • a trading corporation formed within the limits of the Commonwealth; or
  • a financial corporation formed within the limits of the Commonwealth; or
  • the Commonwealth; or
  • a Commonwealth authority; or
  • a body corporate incorporated in a Territory; or
  • one that carries on business in Australia, in the exclusive economic zone or in the waters above the continental shelf an activity (whether of a commercial, government or other nature), and whose central management and control is in Australia.

Meaning of “Australian-based employee”?

The Fair Work Act (s35(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).
This means the Fair Work Act may apply to an employee whose primary place of work is not Australia, provided that they are employed by an “Australian employer”.

What would constitute “engaged outside Australia”?

The Fair Work Act (s35(3)) does not apply extra-territorially where an employee is “engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories”. The meaning of this term is unclear, because it could mean where the employee was originally employed or hired, or refer to the continued engagement of the employee. Factors which may mitigate the application of Australian employment law could include having the recruitment process take place outside of Australia, this circumstance may be considered “engaged outside Australia”. Other factors to be considered when determining this issue include the amount of contact with Australia (such as regular trips to Australia), does the employee report to or take direction from management in Australia, and whether personal trips to Australia are at the company’s expense.

It is not possible to contract out of the jurisdiction of Australian employment law. Any such term in a contract of employment would be invalid.

Case law

The Fair Work Commission determined that it had jurisdiction to hear an application from a person dismissed after making a complaint to the employer about their job who was employed to work in Nauru as a HR consultant. The respondent argued the person was outside the jurisdiction of the Fair Work Act because the person was employed outside of Australia. The applicant was originally engaged in Australia to perform work overseas. The tribunal determined there was substantial connection between the applicant’s work and Australia. The applicant maintained residence in Australia while undertaking work in Nauru.

Offshore workers in Australia

An employee does not become subject to the Fair Work Act simply because they perform some duties in Australia. The Federal Court held that the Fair Work Act applies to employment relationships rather than to particular work, and that for the Fair Work Act to apply, there must be an appropriate connection linking the employment relationship sufficiently with Australia.

Factors such as the length of time spent in Australia, where remuneration and social security contributions are made, the degree of connection between the work performed and Australia, and the immigration status while in Australia may all be relevant factors. See Fair Work Ombudsman v Valuair Limited (No 2) [2014] FCA 759.

Does offshore employment count as service?

On a jurisdictional point in an unfair dismissal matter, Fair Work Australia determined that overseas service may be counted in the minimum period of employment. The employee commenced work with the employer in Pakistan and then came to Australia on a 457 visa. (Then) Fair Work Australia said there was nothing in the Fair Work Act that would prevent time worked overseas by an Australia national system employer counting towards the period of employment. Inclusion of overseas service with the same employer meant the applicant had completed more than six months employment with the employer and therefore Fair Work Australia had jurisdiction to hear unfair dismissal application. See Ali v Industries Services Training Pty Ltd [2011] FWA 9177.

The bottom line: If it is the employer’s intention that Australian employment law should not apply to an employee’s employment, then it may be prudent to have the recruitment process and contract negotiations occur in the country where the employee’s duties will be carried out. Other measures may include the employee reporting to management that is based overseas, or that the employee be a foreign national. The question of Australian-based employment is determined by the particular circumstances applying to each individual employee.
 

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