A contract may call someone an “independent contractor,” but that label does not necessarily determine their legal status.
That was one of the key lessons from Pascua v Doessel Group Pty Ltd, a multi-stage Fair Work Commission (FWC) case that ran from 2024 into 2025. It involved a Philippines-based worker providing legal support to an Australian business under an agreement that described her as an independent contractor.
Despite working remotely from the Philippines, Ms. Joanna Pascua was found to be an employee. The Full Bench later refused permission to appeal that finding, and in June 2025, the Commission found that she had been unfairly dismissed and awarded her $10,800 in compensation.
For Australian businesses outsourcing to the Philippines, the case is significant. It demonstrates why contractor classification cannot rest on contract wording alone and why cross-border arrangements need to be structured carefully.
This guide looks at the full Pascua timeline, the factors that pointed toward employment, why working overseas did not prevent the claim, and what Australian businesses should consider when choosing between direct contractors, an Employer of Record (EOR), and a BPO provider.
Case Background: What Happened in Pascua v Doessel Group?
What did the Pascua v Doessel Group case decide about independent contractors? In short, it decided that a contract’s label doesn’t determine a worker’s true legal status — the reality of how the work was performed does.
The parties were a Brisbane, Queensland-based law firm specialising in credit repair services, and Joanna Pascua, a paralegal who lived and worked from her home in the Philippines. She had never set foot in Australia, yet her contract was governed by Australian law, and her work supported the firm’s day-to-day operations.
The dispute began when the firm’s principal emailed Ms Pascua asserting she had breached her contract and terminated it. She responded by filing an unfair dismissal claim with the Fair Work Commission — a claim only available to employees, not independent contractors. That single procedural fact turned the case into a multi-stage legal contest over her true employment status.
The case unfolded in three key stages:
- September 2024 — At first instance, the Commission examined whether Ms Pascua was an employee or an independent contractor, finding in her favour despite her contract’s “Independent Contractor Relationship” heading.
- February 2025 — Doessel Group appealed to the Full Bench, arguing (among other things) that Ms Pascua’s location overseas should affect her legal status. The Full Bench rejected that argument and largely upheld the earlier findings.
- June 2025 — Deputy President Slevin issued the final decision, confirming Ms Pascua had been unfairly dismissed and awarding her $10,800 in compensation.
Employee or Independent Contractor? Why the Label Didn’t Hold
Can an overseas worker engage as a contractor be considered an employee?
Yes. The Pascua case demonstrates that describing a worker as an “independent contractor” does not necessarily figure out the legal character of the relationship.
The Commission examined the rights and obligations created by the agreement rather than treating its contractor terminology as conclusive.
The misclassification of independent contractors can occur when the contractual label does not reflect the legal nature of the working relationship. For Australian businesses using offshore workers, this makes accurate classification important from the beginning of the engagement.
Ms Pascua’s physical location in the Philippines also did not prevent the Commission from finding that an employment relationship existed with the Australian business.
Australian businesses should also be aware that the employee-versus-contractor test has since changed.
From 26 August 2024, the Fair Work Act introduced a broader “whole of relationship” test for relevant businesses. It generally requires consideration of the real substance, practical reality and true nature of the relationship, including the terms of the contract and how the relationship operates in practice.
The newer test was not applied to Ms Pascua’s original engagement. However, it makes careful employment classification particularly important for businesses entering contractor arrangements today.
Independent Contractor vs Employee in the Philippines: Five Factors That Pointed Towards Employment
The Commission considered the overall contractual relationship rather than relying on a single factor.
For businesses reviewing their own offshore arrangements, several features of the Pascua relationship are particularly instructive.
| Factor | Why It Pointed Towards Employment |
| Schedule and working arrangements | Ms Pascua’s working arrangements were structured around the requirements of the Australian business rather than reflecting a completely independent operation. |
| Day-to-day integration | Her role was integrated into the firm’s operations. The way she communicated and performed work supported the conclusion that she functioned as part of the business rather than as an external enterprise. |
| Personal performance of the work | The arrangement depended on Ms Pascua personally performing the required services, which was relevant when assessing whether she was operating an independent business. |
| Equipment and presentation as part of the team | Aspects of how Ms Pascua performed and presented her work connected her closely with the firm’s operations rather than positioning her as a separate business providing services independently. |
| Remuneration and contractual conditions | Her remuneration, hours, and other contractual conditions were relevant to the overall characterisation of the relationship and were considered alongside the other terms of the agreement. |
These factors should not be treated as a simple checklist where one feature automatically makes someone an employee.
Worker classification is fact-specific and depends on the applicable legal test and the relationship.
For Australian businesses using contractors in the Philippines, the practical question is therefore not simply “What does the contract call them?” but “Does the legal and practical structure of the arrangement genuinely support contractor status?”
Why Geography Didn’t Shield the Employer — and Why It Cuts Both Ways
One of the most important aspects of Pascua was the worker’s location.
Ms Pascua lived and performed her work in the Philippines. Nevertheless, the Full Bench found no error in the conclusion that she was an employee.
The Full Bench observed that there is nothing inherently preventing an Australian employer from entering into a contract of employment with someone who performs work overseas.
That does not mean every worker in the Philippines who provides services to an Australian company automatically receives every protection under the Fair Work Act. Whether Australian workplace laws apply can involve additional jurisdictional considerations.
But the case does demonstrate why businesses should not assume:
“They’re overseas, so Australian employment law doesn’t apply.”
Businesses should also consider the other side of the cross-border relationship. Engaging workers in the Philippines may create obligations under Philippine employment, tax, payroll, social contribution, and other regulatory requirements.
Geographic distance does not automatically limit legal considerations to one jurisdiction.
Our guide to the hidden risks of DIY offshore hiring explores these cross-border considerations in more detail.
Misclassification of Independent Contractors: Why the Stakes Are Getting Higher
The misclassification of independent contractors could have significant financial consequences if someone engaged as a contractor is later found to be an employee entitled to wages or other employment benefits.
Australian businesses should also be aware of the criminal underpayment laws that began on 1 January 2025.
Under the Fair Work Act, intentionally underpaying an employee’s wages or certain entitlements can now constitute a criminal offence. Honest mistakes are treated differently; the criminal offence concerns intentional underpayment.
Depending on the circumstances, individuals convicted of criminal underpayment offences can face substantial fines and up to 10 years’ imprisonment.
However, an important distinction needs to be made:
Misclassifying a worker as an independent contractor is not automatically criminal wage theft.
The criminal offence has separate legal requirements relating to intentional underpayment.
The broader takeaway for businesses is that inaccurate worker classification can create significant downstream risks if it results in employees not receiving the wages or entitlements legally owed to them.
Is It Safer to Hire Directly or Through an Outsourcing Provider?
A reputable outsourcing or Employer of Record provider can help manage many of the employment, payroll, HR, and local compliance responsibilities associated with building a team in the Philippines. However, no engagement structure automatically eliminates every legal risk.
Direct Contractor Arrangements
A direct contractor arrangement can be appropriate when the individual genuinely operates as an independent contractor.
The risk arises when the agreement says “contractor”, but the legal and practical characteristics of the relationship point towards employment.
In that situation, the Australian business may face claims or liabilities that it did not anticipate when the arrangement was established.
Employer of Record
Under an Employer of Record (EOR) in the Philippines model, the EOR generally acts as the worker’s local legal employer and manages agreed responsibilities such as employment contracts, payroll, statutory contributions, and HR administration.
This provides a more established employment structure for businesses that want dedicated Philippines-based staff without establishing their own local entity.
An EOR can help manage significant local employment and administrative responsibilities, although businesses should still obtain appropriate advice about any Australian obligations that may arise from their arrangement.
Business Process Outsourcing
A BPO arrangement is different again.
Rather than engaging an individual worker directly, the client outsources an agreed business function or process to a provider that uses its own workforce and management structure to deliver the service.
Depending on the arrangement, BPO providers may also provide recruitment, onboarding, training, performance management, quality assurance, and operational oversight.
The right structure ultimately depends on whether your business needs a genuine independent service provider, dedicated offshore employees, or a fully managed outsourced function.
If you’re comparing these options, our guide on whether Australian businesses need a local entity to hire in the Philippines explains common approaches in more detail.
Practical Steps for Businesses Outsourcing to the Philippines
The Pascua case provides several practical lessons for Australian businesses working with offshore contractors and remote teams.
1. Audit existing outsourcing arrangements.
Review how workers are engaged rather than relying solely on the words “independent contractor” in an agreement. Consider working arrangements, integration, delegation rights, remuneration, and other relevant factors.
2. Check whether the contract matches the actual arrangement.
Where the current whole-of-relationship test applies, both contractual terms and how the relationship operates in practice can be relevant.
3. Review remuneration and employment entitlements.
If there is a possibility that a contractor may legally be an employee, obtain advice about wages, superannuation, leave, and other potential entitlements.
4. Consider obligations in both countries.
Cross-border employment arrangements may raise Australian and Philippine legal, tax, payroll, and regulatory considerations.
5. Consider an EOR or BPO structure where appropriate.
If your business needs long-term offshore staff working closely with your operations, an EOR or managed outsourcing arrangement may be more suitable than trying to structure the relationship as independent contracting.
6. Consult a qualified employment lawyer.
Worker classification is fact specific. Professional advice is particularly important when there is uncertainty about Australian or Philippine employment obligations.
How CreaThink Solutions Helps Businesses Outsource to the Philippines
The Pascua case highlights an important principle for Australian businesses: the structure used to engage offshore workers should reflect the real nature of the relationship.
At CreaThink Solutions, we help Australian businesses build and manage teams in the Philippines through structured EOR and BPO solutions.
Through our Employer of Record (EOR) solution, CreaThink Solutions acts as the local legal employer and manages agreed employment-related responsibilities in the Philippines, including employment documentation, payroll, statutory contributions, and HR administration.
This gives businesses an established local employment structure without requiring them to create their own Philippine entity.
For companies that prefer to outsource an entire business function, our BPO solutions provide managed teams built around defined service requirements. Depending on the engagement, this can include structured onboarding, operational support, performance management, and quality assurance.
These models can help businesses manage many of the practical and local compliance responsibilities associated with building a Philippines-based team. They should not, however, be viewed as automatically eliminating every potential Australian legal obligation.
Build Your Philippines-Based Team on the Right Structure
The central lesson from Pascua v Doessel Group is not that Australian businesses should avoid hiring or outsourcing to the Philippines.
It is that the legal structure should match the reality of the working relationship.
A contractor agreement can be appropriate when someone genuinely operates as an independent contractor. When a business needs long-term staff working closely within its operations, an EOR, direct employment, or BPO structure may be more appropriate.
Choosing the right structure from the beginning can help reduce uncertainty and make employment, payroll, HR, and compliance responsibilities clearer as your offshore team grows.
If you’re considering hiring or outsourcing in the Philippines, contact CreaThink Solutions to discuss EOR and BPO options for your business.
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This article is for general informational purposes only and does not constitute legal advice. Employment classification and cross-border employment obligations depend on the circumstances of each arrangement. Businesses should obtain advice from appropriately qualified Australian and Philippine professionals where required.
Sources:
- L&E Global, “Australia: Cross-Border Outsourcing Arrangements: When Workers Overseas Can Claim Unfair Dismissal” (23 October 2025)
- TOA Global, “Avoiding Another Unfair Dismissal Case: Lessons from Pascua”
- Pascua v Doessel Group Pty Ltd [2024] FWC 2669; Doessel Group Pty Ltd v Pascua [2025] FWCFB 43; Pascua v Doessel Group Pty Ltd [2025] FWC 1833