Company ignored a Fair Work order, so its director was ordered to pay

What happened

Mr Dimkovski worked part time for Majorsite Property Group from 15 January 2022 until he was dismissed on or around 17 November 2022. His job was covered by the Cleaning Services Award 2020. The company had one director, Mr Atay, who was also its company secretary.

His evidence, which nobody contested, was that from October 2022 until 13 November 2022 he worked from 11.00 am to 2.00 pm on Saturdays and Sundays at a shopping centre in Brunswick without being paid the award's weekend penalty rates. When he was dismissed he had more than 43 hours of annual leave owing, which was not paid out, and he received no notice or pay in lieu of notice. No superannuation was paid for him at all.

He lodged an unfair dismissal claim. On 27 March 2023 the Fair Work Commission found the dismissal was unfair and ordered the company to pay him $3,907.24, less tax, before 8 April 2023. On 3 April 2023 the company was sent a letter by registered post and email reminding it of the deadline and warning that failing to comply was a criminal offence. It still had not paid by the time of the court hearing more than a year later.

The claim

Mr Dimkovski filed a small claim in the Federal Circuit and Family Court on 13 December 2023. The small claims procedure is a less formal way to recover money an employer was required to pay under the Fair Work Act 2009 (Cth) or an award.

He asked for two things: the underpaid wages and entitlements, and the unpaid unfair dismissal compensation. He also asked the court to find that Mr Atay was personally liable for both. A judicial registrar ordered the underpayments but not the Commission's compensation, so he applied for a review, which meant Judge Young heard the claim afresh. Neither the company nor Mr Atay filed anything or came to the hearing. Mr Dimkovski was represented by the United Workers Union.

What the court decided

Judge Young found that the company had breached s 44 (the National Employment Standards, which cover paying out annual leave and giving notice) and s 45 (the award) of the Fair Work Act. The judge also found that by not paying the Commission's order, the company contravened s 405, which says a person to whom an unfair dismissal order applies must not contravene it. Each of these is a civil remedy provision, so the court could order compensation for the loss.

The judge held that the unpaid order could be recovered as a small claim, because it was an amount the employer was required to pay the employee under the Act. The court then ordered the company and Mr Atay to pay, jointly and severally, $2,312.81 in wages and entitlements, $76.03 in superannuation and the $3,907.24 owed under the Commission's order, plus $720.37 in interest. Jointly and severally means Mr Dimkovski could recover the whole amount from either of them.

Why: the legal test for a director's liability

Section 550 of the Fair Work Act says that a person who is involved in a contravention is taken to have contravened the provision themselves. A person is involved if they aided or procured it, induced it, conspired to bring it about, or were knowingly concerned in it.

To be knowingly concerned, the person must have been an intentional participant who actually knew the essential facts that made up the contravention. Knowledge can be inferred from exposure to the obvious. They do not have to know the conduct was against the law. There must also be a practical connection between the person and the contravention.

On the underpayments, the judge found that the company's accountant worked under Mr Atay's instruction and direction, that Mr Atay decided where and when Mr Dimkovski worked and what he was paid, and that he made the decision to dismiss him. That was enough. On the Commission's order, Mr Atay was the company's controlling and guiding mind, and the company had been told the payment was due. The judge found he was involved in every contravention, so he was liable just as the company was.

What this means for you

If you have won an unfair dismissal order and your employer has not paid, the order does not simply lapse. Non-payment is a further contravention that a court can enforce, and the small claims procedure may be a practical way to do it. Where the employer is a small company, it is worth asking whether the person who ran it, set your pay and made the decisions can be named personally.

For employers, the lesson is that a company structure does not protect a director who controls wages. Since 1 January 2025, intentionally underpaying an employee can also be a criminal offence. Underpayment claims generally have to be brought within six years, so consider getting advice early.