A recent FWC ruling provides important lessons for recruiters on essential legal considerations when engaging global talent.

Hiring talent across international borders introduces a myriad of potential legal complications for HR. Staying on top of Australia’s evolving legislative landscape can be challenging enough – when new jurisdictional layers are added to the equation, ensuring compliance becomes even more daunting.

For instance, imagine a case where an Australian company employed a US citizen, born in India, to work in Argentina. Which jurisdictional laws might apply to them? Would they technically be an Australian-based employee? 

This scenario might sound outlandish, but, in fact, this was a genuine legal dilemma recently dealt with by the Fair Work Commission (FWC).

The dispute was brought forward by a former employee of a lithium mine in Argentina, which was owned and operated by a Sydney-based company. After being dismissed from the mine in January last year, the employee filed a general protections claim with the FWC. 

In response, his employer raised a jurisdictional objection, claiming he had been “engaged outside Australia, to perform duties outside Australia, and was therefore not an Australian-based employee”.

The debate largely centred around where the contract was formed: was it at the physical location of the employee at the time of signing the offer, or the company’s registered address in Sydney to which the signed offer was emailed?

Was the employee Australian-based?

In order to be entitled to the general protections afforded by the Fair Work Act 2009, employees need to fall under the Act’s definition of an “Australian-based employee”; namely, an employee:

(a) whose primary place of work is in Australia; or

(b) who is employed by an Australian employer (whether the employee is located in Australia or elsewhere); or

(c) who is prescribed by the regulations.

However, the Act stipulates an exception to this in cases where an employee is “is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories”.

This exception formed the crux of the employer’s argument that the employee was not Australian-based, given he had been outside Australia when he signed his employment contract.

“In this case, the employer probably thought they had pretty good prospects, given that they had an Indian-born US citizen, who was recruited overseas, had never stepped foot in Australia, and was recruited to work on an Argentinian project,” says Charles Power, Partner and National Practice Chair of the Workplace Relations and Safety Group at Holding Redlich.

“[However], it’s a basic principle of contract law that the acceptance of an offer isn’t effective until it’s communicated to the person or entity that made the offer.”

In this instance, as the entity was based in Australia when it received his signed contract, the employment relationship had officially started on Australian soil. 

“In most cases, it will cost the employer less to settle the claim than to contest the jurisdiction on technical grounds.” – Charles Power, Partner and National Practice Chair of the Workplace Relations and Safety Group at Holding Redlich

There is an exception to this rule called the “postal rule”, he says, where acceptance of an offer is established at the moment of sending a contract by post, rather than when the acceptance is received by the employer. However, the FWC found no good reason to apply the postal rule in this case where the communication of the accepted offer was instantaneous by email. 

As a result, it found that the worker was an Australian-based employee, employed by an Australian employer and engaged in Australia, and thus rejected the company’s jurisdictional objection. The employee is now free to proceed with the general protections claim.

“I think the case shows the risks in challenging the jurisdiction of the Commission when it comes to dismissal disputes, whether they be unfair dismissal claims or general protections claims,” says Power.

“In most cases, it will cost the employer less to settle the claim than to contest the jurisdiction on technical grounds. You want to have good reasons and to have considered your situation carefully before you embark on a jurisdictional challenge.”

Legal considerations when hiring global talent

For employers engaging or hoping to engage global talent, navigating the legal and jurisdictional complexities of the process can seem like an intimidating task.

In a recent informal poll of AHRI’s LinkedIn audience, which surveyed over 100 AHRI members, legal compliance was voted the number-one challenge in managing a global workforce (cited by 44 per cent of respondents), followed by managing cultural expectations (23 per cent). 

However, in the current skills landscape, the opportunities provided by global talent are growing harder to overlook. 

According to data from Jobs and Skills Australia, more than one in three occupations assessed were in national shortage (36 per cent) in 2023. This marks an increase of 5 percentage points compared to 2022.

In the age of remote and hybrid work, many employers are more set up to hire global talent than ever before. However, according to Power, workplace law has yet to catch up with the shift towards borderless workforces.

“The common law is very slow to evolve,” he says. “While, inevitably, as a result of increasing globalisation, there is an increasing convergence around what international labour law is, a lot of that’s often not reflected in laws in a domestic jurisdiction.”

As a result, it’s important for employers to ensure their employment contracts contain the right provisions to cover their backs in cases like this. 

“Ideally, the contract itself would specify where the employer’s place of business is, so there’s no doubt about that,” says Power. “It should also specify which laws govern the employment relationship that it regulates.”

Whether or not a global employee is subject to local entitlements, such as paid leave or termination rights, as well as Australian entitlements, will depend on the location of the employee and the nature of the organisation. As a result, it’s advisable to seek advice from a local third party about whether they are covered by the local law.  

“Sometimes, I’ve [also] seen provisions that deal with services for employees to get tax advice, because you need to turn your mind to whether or not superannuation contributions need to be made when they’re overseas, and what kind of income protection insurance applies for work-related injuries,” says Power.

To simplify the process, employers might consider using an Employer of Record – a third-party company operating in the global employee’s local jurisdiction which hires workers on behalf of your company and takes on legal responsibility for aspects such as payroll, tax and more.

By carefully considering these factors before engaging overseas employees, HR and recruiters can open up their organisations to the massive skills potential of a borderless workforce while minimising the legal risks attached to it.

Need help brushing up on HR laws and compliance? AHRI’s short course will give you an understanding of the key elements of legislation, regulation and practices HR needs to be across.