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Startups and small businesses have long leaned on virtual assistants (VAs) and freelancers to stay agile. But a groundbreaking case involving a Filipina VA and her Australian client is sending shockwaves through the outsourcing world  and it could change how companies engage remote workers.

This blog explores what this legal victory means for startups, how it highlights the risks of contractor misclassification, and why more companies are turning to Employer of Record (EOR) solutions to stay compliant and competitive.

What Happened: A VA Takes a Stand and Wins

A Filipina virtual assistant filed a case against her Australian client, claiming she was wrongly classified as an independent contractor despite working fixed hours, using company tools, and receiving direct instructions. The court sided with her, ruling she should have been treated as an employee with all corresponding entitlements.

This case has become a wake-up call for founders relying heavily on remote contractors, especially in the Philippines and other offshore markets.

Why It Matters: The Real Cost of Misclassification

Although the client may have believed that working with a VA through a contractor agreement offered flexibility, the court found the working relationship resembled employment triggering liabilities for:

• Unpaid leave and rest day premiums 
• Severance or separation pay 
• Possible tax penalties for misreporting the nature of the relationship 
• Legal fees and reputational damage 

This ruling sets a powerful precedent not just in Australia, but globally as more workers become aware of their rights.

Startups, Beware: The Contractor Model Has Legal Risks

Early-stage companies often hire contractors or VAs directly to save on costs and avoid HR complexity. But if your team is working regular hours under your control, you may be exposed to misclassification risk.

Common pitfalls:

• Contractors acting as full-time employees 
• Lack of proper contracts and documentation 
• No social protection or tax contributions 
• Risk of lawsuits from current or former team members 

This Isn’t Just an Australian Issue

Labor regulators across the globe are tightening the definition of what it means to be an “independent contractor.”

• UK: Uber drivers ruled to be workers entitled to benefits 
• US: The gig economy faces scrutiny under the PRO Act 
• Philippines: BIR is enforcing new freelancer tax rules and documentation requirements 

If you’re hiring globally, especially in developing markets, now is the time to rethink your hiring structure.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party that legally employs your workers on your behalf. They handle:

• Payroll and taxes 
• Contracts and benefits 
• Labor law compliance 
• Risk management 

Meanwhile, you retain control over daily tasks and performance.

How EOR Solves the Problem

1. Full Compliance 
   • EORs ensure your hires meet local labor laws reducing the risk of legal claims. 
2. Risk Reduction 
   • Your business is no longer legally responsible for misclassification. 
3. Faster Global Hiring 
   • Hire in the Philippines without setting up a local entity. 
4. Better Retention 
   • Offer legitimate employment benefits that help attract and keep top-tier talent. 

Real-World Case: From Contractor to Compliant Team

After the VA’s case made headlines, several Australian startups began reviewing their remote work arrangements. One SaaS company transitioned their entire offshore team mostly in the Philippines into an EOR setup. The result?

• Increased retention 
• Investor confidence 
• Reduced legal exposure

Key Takeaways for Founders

• The Filipina VA’s win shows that misclassified contractors can and will fight back. 
• Even informal, overseas relationships can carry legal consequences. 
• EORs help startups remain lean without breaking the law. 

Whether you’re a startup founder in Australia, the US, or anywhere hiring remote teams, this is your signal to review your contractor model. The risks are real, and the legal landscape is evolving.

Using an EOR isn’t just safer- it’s smarter.

📩 Email eor@zeroten.work to learn more about how EOR can help you build a compliant global team.