Employing outworkers and your legal obligations in Australia

An outworker is an employee or contractor who performs work away from your business premises, usually at home, in a garage, or anywhere that would not normally be thought of as a business location. Outworkers are most common in the textile, clothing and footwear (TCF) industry, but the category is not confined to it. Photo finishing, packing, data entry and assembly work can all be done by outworkers.

Working out of sight does not take a worker outside the workplace relations system. If your business engages outworkers, directly or through a chain of subcontractors, you must meet the National Employment Standards, apply the correct modern award including its outworker terms, and comply with specific obligations that apply to TCF outwork. This guide sets out who the obligations apply to, what each duty requires, and what happens if you get it wrong.

Who the rules apply to

The Fair Work Act 2009 (Cth) (the Fair Work Act) deals with outworkers by reference to the ordinary meaning of the term: a person who performs work for your business at premises that are not your business premises. The Act expressly leaves "matters relating to outworkers (within the ordinary meaning of the term)" to State and Territory law as non-excluded matters under s 27(2)(d), and the Fair Work Ombudsman describes outworkers as "contractors or employees who work at home or at a place that wouldn't normally be thought of as a business location".

Three situations bring your business within the rules:

You employ outworkers directly: the outworker is an ordinary employee, and every obligation you owe any employee applies, starting with the National Employment Standards.
You engage outworkers as contractors: engagement as a contractor does not automatically remove the protections. Modern awards can include terms about the conditions under which an outworker entity arranges work of a kind often performed by outworkers (s 140(1)(b) of the Fair Work Act), and in the TCF industry contract outworkers can be treated as employees for most purposes (s 789BB).
You sit in the supply chain above the outworker: where goods are produced through a chain of two or more arrangements, the work is performed "directly" for the entity that engaged the worker and "indirectly" for every other party to the chain (s 17A). Each of those entities can owe obligations, including unpaid wages.

An outworker entity is a person who arranges for work of a kind often performed by outworkers to be done for them, directly or indirectly. A modern award can cover an outworker entity, but only in respect of outworker terms (ss 48 and 143(4) of the Fair Work Act). If you are a clothing brand that never employs anyone but arranges for garments to be made through subcontractors, you are likely an outworker entity.

The National Employment Standards: your baseline duty

Every outworker who is an employee is entitled to the National Employment Standards (NES) in Part 2-2 of the Fair Work Act. The NES are minimum standards that cannot be displaced: a modern award or enterprise agreement must not exclude them (s 55(1)), and a contract or agreement that purports to set them aside is ineffective to the extent of the inconsistency. Contravening the NES is itself a civil remedy provision (s 44).

Section 61 of the Fair Work Act now lists twelve NES matters, not the ten the standards are sometimes remembered as having:

Maximum weekly hours: 38 hours per week, plus additional hours that are reasonable in the circumstances.
Requests for flexible working arrangements: eligible employees may request changes to their working arrangements, and employers must respond properly.
Casual employment: the definition of casual employee, casual loading, and the pathway for casuals to change to permanent employment.
Parental leave and related entitlements: up to 12 months of unpaid parental leave, with related entitlements and protections.
Personal/carer's leave, compassionate leave and paid family and domestic violence leave: paid personal/carer's leave, unpaid carer's leave, and compassionate leave.
Community service leave: paid and unpaid leave for jury service and emergency management activities.
Long service leave: a minimum standard, with State and Territory long service leave laws often providing more.
Public holidays: a paid day off on public holidays, with a right to refuse unreasonable work on those days.
Superannuation contributions: the NES now include an obligation for employers to make required superannuation contributions.
Notice of termination and redundancy pay: minimum notice periods and redundancy entitlements on termination.
Fair Work Information Statement: must be given to every new employee before they start, or as soon as practicable afterwards.

The casual employment and superannuation matters were added to the NES in recent years, which is why the older "ten standards" lists you will see online are outdated. A casual outworker does not accrue paid annual leave or paid personal/carer's leave, because the casual loading is paid instead, but the NES still apply in modified form: casuals get unpaid carer's and compassionate leave, community service leave and the Fair Work Information Statement, and they are covered by the casual employment provisions.

Your modern award: outworker terms and the TCF award

The applicable modern award sets the floor for wages, hours, overtime, penalties and allowances on top of the NES. For outworkers there are two additional layers.

First, modern awards may include outworker terms: terms about the conditions under which an employer may employ outworkers, and the conditions under which an outworker entity may arrange for outwork to be performed (s 140 of the Fair Work Act). Where an award contains "designated outworker terms", those terms continue to apply even when an enterprise agreement covers the work (s 57A). An enterprise agreement therefore cannot be used to strip outworker protections out of the award.

Second, the TCF industry has its own award, the Textile, Clothing, Footwear and Associated Industries Award 2020 (MA000017). Under that award, contract outworkers in the TCF industry have the same minimum entitlements as employee outworkers, including award rates, piece rate arrangements and record-keeping requirements. The Fair Work Ombudsman's guidance is explicit: "contract outworkers in the textile, clothing and footwear (TCF) industry have the same minimum entitlements as employee outworkers in the industry."

Where no award covers the outworker's work, the national minimum wage applies. From 1 July 2025 the national minimum wage is $948.00 per week based on 38 ordinary hours, or $24.95 per hour, set by the Fair Work Commission in the 2025 Annual Wage Review ([2025] FWCFB 3500). This is the floor for adult employees who are award or agreement free, and it is reviewed each year.

TCF contract outworkers: deemed employees and supply-chain liability

The sharpest obligation for TCF businesses is in Part 6-4A of the Fair Work Act. A TCF contract outworker is a TCF outworker who performs work other than as an employee. Section 789BB provides that a TCF contract outworker is taken to be an employee, and a national system employee, in relation to work performed directly or indirectly for a Commonwealth outworker entity, and the person who engages them is taken to be the employer. The stated objective is that a contract outworker should have the same rights and obligations in relation to the work as an employee would have. In other words, in the TCF industry, labelling a home-based machinist a "contractor" does not remove their employee entitlements where the work is done for your business through a chain.

Part 6-4A also creates a direct recovery mechanism. If a TCF outworker is not paid an amount due for TCF work, the outworker can demand payment from an indirectly responsible entity higher up the chain: a Commonwealth outworker entity for whom the work was performed indirectly (s 789CA). A retailer that sells goods produced by the work is not an indirectly responsible entity if it had no right to supervise or control the work before delivery. The demand must be in writing, specify the amount and the responsible person, and give the entity at least 14 days to pay (s 789CC). If it is not paid, the outworker, their union, or a Fair Work inspector can apply to the Federal Court, the Federal Circuit and Family Court of Australia (Division 2) or an eligible State or Territory court for an order that the entity pay (s 789CD). This is how a brand or wholesaler can end up paying wages owed by a subcontractor further down the chain.

The regulations can also prescribe a TCF outwork code dealing with record-keeping and reporting standards of conduct and practice (Division 4 of Part 6-4A). The code cannot specify wages or other entitlements, and a TCF award prevails over it to the extent of any inconsistency. Separately, union officials hold a right of entry to investigate suspected contraventions relating to TCF award workers, including designated outworker terms (s 483A of the Fair Work Act). Some States add their own layer: South Australia, for example, has a Clothing Outworker Code of Practice under its Fair Work Act 1994 (SA).

The consequences of non-compliance

The enforcement risks for outworker non-compliance are real and escalating:

Civil penalties and back pay: contraventions of the NES, modern awards and outworker terms are civil remedy provisions. A contravention of an outworker term attracts maximum penalties of 60 penalty units, rising to 600 penalty units for a serious contravention, and the Fair Work Ombudsman routinely seeks back pay orders for underpaid outworkers alongside penalties.
Fair Work Ombudsman enforcement: the regulator investigates outworker underpayments through audits and complaints, can issue compliance notices, accept enforceable undertakings, and litigate in the Federal Court. Its published guidance on outworkers and the TCF award is a practical starting point for checking your obligations.
Criminal wage theft: since 1 January 2025, s 327A of the Fair Work Act makes it a criminal offence for an employer to intentionally fail to pay an amount required under the Act, an award or an agreement. The offence carries up to 10 years imprisonment for an individual, and fines of up to 5,000 penalty units for an individual or 25,000 penalty units for a body corporate, or three times the underpayment amount if that is greater. A small business that self-reports and complies with the Voluntary Small Business Wage Compliance Code is protected from referral for prosecution (s 327B).
Supply-chain exposure: through the deemed employee rule and the recovery mechanism in Part 6-4A, an entity that never directly employs the outworker can still be ordered to pay unpaid wages.

Compliance checklist

Run through this checklist to close the gaps most outworker arrangements expose:

Confirm who your outworkers are and whether they are employees or contractors, and document the basis of the engagement.
Identify the modern award that covers the work, and check its outworker terms, including any piece rate regime and how it compares with the minimum wage.
Benchmark every outworker against all twelve NES matters, not just pay.
Map your supply chain: identify every entity that arranges for work of a kind often performed by outworkers, directly or indirectly, for your business.
Check whether the TCF outwork code applies to you and what record-keeping it requires, and keep the records the award requires for outworkers.
Pay on time, every time. An intentional failure to pay is now a criminal offence, not just a civil penalty.
If you receive a demand under s 789CC from an outworker or their representative, treat the 14-day window seriously and get advice before it expires.

Where a lawyer helps

An employment lawyer can map which of these layers applies to your business, which is often harder than it sounds: award coverage for outworker entities turns on how work is arranged, not on who signs the payslips. A lawyer can also review your supply-chain contracts to allocate outwork obligations and protect you from indirect liability, advise on piece rates and record-keeping against the TCF award and code, and respond to s 789CC demands or a Fair Work Ombudsman investigation. If you have any doubt about an existing arrangement, classification advice before the regulator asks questions is substantially cheaper than defending a penalty application or a wage theft referral afterwards.

The contractor at the end of your chain

The obligation most often missed is the one for businesses that never employ anyone: the clothing brand, wholesaler or retailer that arranges outwork through subcontractors and assumes the workers are "not their employees". In the TCF industry that assumption is legally wrong. The deemed employee rule and the recovery provisions mean a home-based contractor you have never met can have a statutory entitlement to be paid by you, with a court order available if you ignore a written demand. The first action to take this week is to map who performs outwork for your business and on what terms. If the answer involves home-based workers in a chain of arrangements, have the classification and the payment arrangements reviewed before a demand letter does it for you.