The risks of misclassification: What councils need to know

Published on 26 August 2025

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By Jaaden Morrall, Senior Workforce Advisor/Consultant and Angela Farmer, Workforce Advisor, Legal and Workforce

A recent decision by the Fair Work Commission in the case of Pascua v Doessel Group Pty Ltd has raised significant concerns across Australia’s employment landscape. The Commission found that a paralegal working remotely from the Philippines was legally considered an employee under Australian law, despite being engaged as an independent contractor and working entirely offshore. 

While this ruling falls under the Fair Work Act 2009 (Cth) (FWA) and does not directly apply to Queensland councils (who are governed by the Industrial Relations Act 2016 (Qld) (IR Act)), it signals a broader shift in how employment relationships may be interpreted, particularly in the context of remote and digital work arrangements. 

Key concerns raised: 

• The decision may set a precedent for classifying overseas contractors as employees under Australian law. 

• It raises questions about jurisdiction, international legal norms, and the reach of domestic employment legislation. 

• Critics argue it could lead to: 

• Increased obligations for employers (e.g. superannuation, payroll tax). 

• Reduced flexibility in global hiring. 

• Legal uncertainty for businesses operating across borders. 

While the IR Act governs local government employment under state awards and agreements, this case highlights broader risks: 

1. Contractor vs Employee Definitions 

Councils engaging independent contractors, particularly those working remotely, must ensure that the nature of the engagement aligns with the definitions outlined in the IR Act. The distinction between an employee and an independent contractor is not based solely on the contract label, but on the substance of the workplace relationship. Several factors which may differentiate these arrangements include: 

• Control over work: Employees typically work under the direction and control of the employer, whereas independent contractors maintain autonomy. 
• Integration into the organisation: If an independent contractor is embedded within a team, attends regular meetings, or works fixed hours, they may be seen as part of the organisation. 
• Provision of tools and resources: Employees are usually provided with tools and equipment, while independent contractors supply their own. 
• Expectation of ongoing work: A continuous working relationship may indicate employment rather than a discrete contractual engagement. 

Some of the key provisions within the IR Act include: 

Section 7 Who is an employer: This is relevant because if an independent contractor is found to be working under conditions that resemble a contract of employment, the engaging entity may be deemed an employer.  

Section 8 Who is an employee: Courts often look beyond the label of the contract to assess the actual nature of the working relationship, including control, integration and continuity. This section is relevant as it defines the different types of employees.  

• Section 9 What is an industrial matter: This section is relevant as it includes disputes about the nature of employment relationships, which would encompass misclassification of contractors. This section also refers to Schedule 1, which further outlines the types of industrial matters and many could be relevant in these scenarios.  
• Section 302 Misrepresenting employment as independent contracting arrangement: This section makes it unlawful for an employer to misrepresent an employment relationship as an independent contracting arrangement. 

• Section 303 Dismissing to engage an independent contractor: This section provides that an employer must not dismiss or threaten to dismiss an employee for the purpose of re-engaging them as a contractor to perform the same or substantially the same work they were performing as an employee.

• Section 304 Misrepresentation to engage as independent contractor: This section makes it unlawful for an employer to make a false statement to persuade or influence a person to enter into a contract for services when the relationship is, in substance, an employment relationship.  

In the case of Pascua v Doessel Group Pty Ltd, the Fair Work Commission applied similar criteria under the FWA to determine that the overseas paralegal was, in substance, an employee. Despite being labelled an independent contractor and working offshore, the individual was found to be integrated into the business, subject to control and direction, and performing work like that of a regular employee. Further, the remuneration structure was below Award minimums for comparable legal roles, which is atypical for contractors. The contract even described the pay as a “salary all inclusive as a Full Time Employee”.  

This ruling highlights the risk of contractor misclassification, which can lead to adverse consequences such as:

• Liability for unpaid entitlements (e.g. leave, superannuation, redundancy).
• Exposure to unfair dismissal claims.
• Payroll tax and workers’ compensation obligations.
• Reputational damage and compliance breaches.

For Queensland councils, while the IR Act governs employment relationships, the principles from the Fair Work Commission’s decision may still influence interpretations; especially in cases involving remote or digitally integrated workers. Councils should be vigilant in ensuring that contractor arrangements do not inadvertently create employment relationships under state law.  

2. Cross-Border Engagements 

Although councils rarely engage offshore workers, the rise of digital service delivery, consultants, and interstate collaborations means this issue could become more relevant. Councils must be cautious when engaging external providers who work remotely but are embedded in council operations. 

3. Award Compliance 

Under Queensland state awards, councils must ensure that any role resembling employment is covered by the appropriate classification, entitlements, and protections. Misclassification could lead to disputes, back payments, or reputational risk. 

Recommended actions for councils:

• Review contractor arrangements to ensure they meet definitions in the IR Act/Awards and are not functionally equivalent to employment relationships.
• Clarify roles and responsibilities in contracts, especially for remote or project-based work. 
• Seek legal advice before engaging contractors, particularly from different states/countries.
• Monitor developments in employment law that may influence a need for a review of your contracts.  

If you have any questions about job classifications in Local Government or any other matter, please don’t hesitate to contact the Peak Services Legal team on 07 3000 2148 or at peaklegal@wearepeak.com.au