What are the consequences if I am not paying my employees correctly?

November, 2014

The Fair Work Act contains minimum employment terms and conditions, known as the National Employment Standards (NES). It also establishes a framework for the implementation and operation of industrial instruments such as Modern Awards and Enterprise Agreements, which can also underpin minimum employee entitlements.

What happens if an employer fails to recognise these minimum terms and conditions? What sort of recourse can an employee have, and what might be the ultimate cost to not only an employer company, but its directors?

In Scotto v. Scala Bros Limited and Another, an employee of a delicatessen/café claimed more than $1.5 million in unpaid wages, allowances and entitlements and superannuation guarantee contributions. The Applicant also alleged that a director of the employer company was liable as an accessory for the employer’s conduct, and as such was liable to compensate him for the underpayments, as well as various pecuniary penalties. Over the course of his employment, the Applicant also claimed that he was not provided with pay slips.

The Applicant worked in a family run business and claimed that the original owner of the employer company paid him cash in the hand, referring to it as “pocket money” and then recorded the balance in a book referred to as the “Red Book”.

In time, the owner of the business passed away and his daughter, the Second Respondent, took over its operation.

Although limitation periods precluded the Applicant from recovering the full amount claimed, Judge Cameron of the Federal Circuit Court found that the Applicant was entitled to substantial compensation representing unpaid wages and entitlements, and found that it and the Second Respondent, had contravened various workplace relations laws, in relation to which penalties are yet to be ordered.


This case demonstrates that not only can an employer company be held liable for the non-payment of wages and entitlements, but that company directors can also be held individually liable.

The case is a reminder that employers should be diligent to ensure their compliance with workplace relations laws and industrial instruments, in particular Modern Awards and Enterprise Agreements.

Contact Mills Oakley

For more information, please contact:

Ross Levin | Partner
T: +61 3 9605 0070
E: rlevin@millsoakley.com.au

Malcolm Davis | Partner
T: +61 2 8035 7932
E: mdavis@millsoakley.com.au

Adam Lunn | Partner
T: +61 3 9605 0868
E: alunn@millsoakley.com.au

Lisa Anaf | Partner
T: +61 3 9605 0857
E: lanaf@millsoakley.com.au

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