Beyond borders: when the Fair Work Act follows your employees overseas
Australian employers with international workforces are often surprised to learn that the Fair Work Act 2009 (Cth) (FW Act) can apply to employees who have never set foot in Australia and whose work is performed entirely overseas.
A recent Fair Work Commission decision, Sanderson v Brightest Australia Pty Ltd [2026] FWC 1633, is a timely reminder that the question of whether the FW Act applies to overseas employees turns on technical legal tests, rather than the practical reality of where the work is performed.
For Australian businesses operating across borders, the consequences of getting this wrong can be significant and can include exposure to unfair dismissal claims, general protections applications, underpayments and under accrual of paid leave entitlements where FW Act coverage (in whole or in part) is successfully established.
Key takeaways for employers
In our experience, there is risk associated with parties to an employment relationship assuming that the laws of the country in which the employee is located will apply and will operate to the exclusion of the FW Act, even if the parties agree in the relevant employment contract that the laws of that country apply.
Australian employers with overseas employees should:
understand that the FW Act can apply (in whole or in part) to employees located entirely offshore;
review how they employ and onboard overseas employees, including where offers of employment are issued and accepted, and where contracts are signed and received, as these steps directly affect the potential application of the FW Act to offshore employees;
analyse each employment relationship on a case-by-case basis – the application of the FW Act to a particular employment relationship will turn on the individual facts and circumstances of that arrangement;
ensure that, where the FW Act applies, the termination processes for overseas employees comply with the FW Act and any laws of the country in which the employee is located; and
seek advice early, particularly about how to structure the employment of offshore employees and before making decisions to end employment.
Similar analysis should be undertaken by foreign corporations with employees working in Australia.
About the case
David Sanderson lodged an unfair dismissal application against Brightest Australia Pty Ltd after it terminated his employment for alleged underperformance. Mr Sanderson, who lived and worked in New Zealand, was employed to sell a subscription-based app product to New Zealand based customers. Despite not achieving specified sales targets, Mr Sanderson denied having received any clear warning that his employment was at risk.
Deputy President Farouque held that Mr Sanderson had access to the unfair dismissal jurisdiction of the FW Act, even though he worked in New Zealand. Mr Sanderson was found to be an Australian-based employee as defined in the FW Act because:
he was employed by an Australian employer; and
his contract of employment was formed in Victoria.
The Commission further found that Brightest, although a small business employer, had not complied with the Small Business Fair Dismissal Code because it failed to give Mr Sanderson a clear warning that dismissal was a risk if his performance did not improve and did not afford him a proper opportunity to respond before termination. The dismissal was held to be harsh, unjust or unreasonable.
When does the FW Act apply to overseas employees?
The FW Act contains two principal pathways by which it can apply to employees working abroad.
The first test is the national system employer test which asks whether the employment relationship as a whole is ‘ sufficiently connected’ to Australia, regardless of where the employee is physically located. [1] Determining whether an employment relationship is ‘in and of Australia ’ requires a holistic assessment of various factors including but not limited to whether the overseas employee performs duties relating to the employer's Australian operations. It is important to note that foreign corporations are also capable of being ‘national system employers’ for the purposes of the FW Act.
The second test is the Australian-based employee test under which some but not all parts of the FW Act may apply to an employee. [2] This test applies not only to employees whose primary place of work is in Australia, irrespective of the location of the relevant employer, but also in some cases to offshore employees of Australian employers.
An offshore employee of an Australian employer will not be an Australian-based employee if they are:
- ‘engaged outside Australia’; and
- ‘engaged to ‘perform duties outside Australia’. [3]
Importantly, both limbs of this exception must be satisfied before an employee is excluded from coverage by the FW Act.
We continue to see employers operating under the assumption that the exception applies because an employee is engaged to perform duties wholly offshore, only to discover that the employee was engaged in Australia by operation of contract law principles and electronic transactions legislation. As Sanderson v Brightest Australia illustrates, where a contract is signed by the employee and returned by email, the place of receipt of the acceptance, not the location of the employee when they signed the offer of employment, will determine where the contract was formed. Unfortunately for Brightest Australia, this resulted in Mr Sanderson, a New Zealand based employee, having access to the unfair dismissal jurisdiction.
An overseas employee’s access to other employment rights and entitlements, such as long service leave and work health and safety protections, is subject to different analysis which varies between states according to the relevant state-based legislation.
How we can help
Our Employment Team regularly advises both Australian and overseas employers on the extraterritorial application of the FW Act, including the structuring of overseas engagements, facilitating deployment of overseas employees to Australia, jurisdictional risk assessments, and the management of international terminations. We work closely with our colleagues who specialise in migration, tax and corporate law to provide integrated advice on cross-border employment arrangements.
We encourage employers with international workforces to contact our team where questions arise about FW Act coverage for their employees, whether the employees work overseas or in Australia, particularly before making decisions about minimum rights and entitlements, and dismissals.
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