Australian businesses may consider transferring activities or business processes to a different country. This may be motivated by lower labour costs or the availability of additional skilled labour in that jurisdiction. However, it should not be assumed that Australian labour law and the Fair Work Act 2009 (Cth) (FW Act) will not apply to these overseas work relationships.

An Australian company that employs a person who lives and works outside Australia will still be subject to the FW Act (and the modern awards and minimum wage orders that are made by it) unless the employee is engaged outside Australia to perform their duties outside Australia.

When is an employee engaged outside Australia?

Whether an employee was engaged outside Australia depends upon where the formation of their employment contract took place. The method used to provide the contract to the employee will often be determinative of whether the employee was engaged inside or outside Australia.

Where an employment contract is sent to a prospective employee using email, the place where the contract is formed is typically at the registered business address of the employer, rather than the location of signing by the employee. For example, if an Australian employer sends a contract to an employee in the United States via email, the employee signs the contract in the US, and then returns the contract via email to the employer, the employee is engaged inside Australia. The crucial location is therefore not where the contract is signed, but where it is finalised by return communication to the employer. This position is consistent across state and federal legislation regarding electronic transactions.

Alternatively, if the signing and receipt of the employment contract occurs offshore, the employee will be engaged outside Australia. For example, if, while physically present in the US, representatives of an Australian employer conduct the process of signing and formation of an employment contract for an American employee, that employee will be engaged outside Australia.

When is an employee engaged to perform duties outside Australia?

If an employee is engaged outside Australia, they must also perform their duties outside Australia to escape the coverage of Australian labour law.

In Singhal v National Australia Bank Limited (2024), the Fair Work Commission (FWC) determined whether an IT professional who performed duties exclusively in India and had never visited Australia in the performance of his duties could be said to perform those duties in Australia because the Australian business benefited from those duties being performed. The FWC ruled that the crucial question is where the work is physically performed by the employee, rather than the place where the benefit of the work is realised.

As such, if an employee of an Australian employer works exclusively in another country, they are clearly performing work outside Australia, even if the fruits of the employee’s labour are realised in Australia.