Employee or contractor? Reviewing worker status after key FWC decision

A recent Fair Work Commission (FWC) decision is a timely reminder for small business owners to review their contractor arrangements, particularly when engaging sole traders or overseas workers. Just calling someone a contractor doesn’t make it true in the eyes of the law.  

In a landmark decision, the FWC ruled in Doessel Group Pty Ltd v Joanna Pascua [2025] FWC 1833 that a Philippine-based paralegal, engaged under an ‘independent contractor’ agreement, was in fact an employee of the Queensland-based Doessel Group. Despite working remotely, Ms. Pascua was not carrying on her own independent business, but rather integrated into the firm's operations. She worked fixed hours (on Queensland time), used company systems, and received daily instructions, leading the FWC to determine she was entitled to unfair dismissal protections under Australian law.  

Focus on the terms of the contract, not just how the work is performed 

In 2022, the High Court clarified that determining whether a worker is an employee or an independent contractor depends primarily on the terms of the written contract, rather than the overall nature of the working relationship. The FWC's decision followed this precedent, giving weight to the specific legal rights and obligations set out in the contract. 

To work out if your worker is an employee or independent contractor, you need to determine whether your worker is serving in your business. You will need to examine the legal rights of the contract and whether the terms give your business the level of control and integration typically associated with employment. How the work is actually done is of less relevance, unless the behaviour clearly changes what was originally agreed to in the contract. If the contract gives your business the kind of control typically associated with employment, simply hiring a worker outside Australia does not remove your legal responsibilities. 

Not getting it right can be costly 

If the terms of a contract and the nature of the work point to an employment relationship, your business could be exposed to claims for unpaid wages, leave entitlements, superannuation, and even unfair dismissal. There may also be broader implications, including potential underpayments of PAYG withholding, payroll tax, and workers compensation premiums. These under-declarations can also trigger compliance activities such as audits and investigations by relevant government agencies. 

Changes to late payment interest policies by revenue agencies 

The Australian Taxation Office (ATO) and Revenue NSW have recently updated their policies on the treatment of late payment interest for tax defaults, making it more important than ever to get it right. 

From 1 July 2025 interest charged by the ATO for late payments or underpayments will no longer be tax deductible. For more information visit the ATO website.  

Revenue NSW also published its Remission of Interest Guidelines (TAA 001), effective 1 July 2025. Under the new guidelines, the Chief Commissioner will remit no more than 25% of interest imposed. Only in exceptional circumstances (such as system failures or natural disasters) will the Chief Commissioner consider full remission of interest.  

Use agency guidance and seek professional help 

To help you get it right, both the ATO website and business.gov.au provide decision tools to assess whether a worker is a genuine contractor. 

Revenue NSW also provides exemptions for overseas workers who have performed services wholly in another country (or countries) for a continuous period of more than six months. For more information see Revenue Ruling Payroll tax nexus provisions PTA039. 

Regularly reviewing your contracts helps ensure they reflect the actual working relationship and remain compliant with current legal obligations. If you're unsure, seek professional advice to protect your business from costly disputes and compliance risks. 

More information 

Fair Work Australia also provides guidance on the difference between contractors and employees.