What Happened?

Following complaints from employees, Fair Work Inspectors investigated the businesses and formed a belief that seven full-time employees had not received their full entitlements.

The concerns included:

• Unpaid accrued annual leave at the end of employment
• Underpayment of minimum wages during 2022

The leave entitlements fell under the National Employment Standards in the Fair Work Act 2009, while wage obligations were governed by the General Retail Industry Award 2020.

Compliance Notices were issued, requiring the companies to calculate and back-pay a total of approximately $58,600 to the affected workers.

However, the businesses failed to comply.

 

The Consequences

The matter escalated to the Federal Circuit and Family Court of Australia, which imposed substantial financial penalties on:

• Three corporate entities
• The sole director personally

Importantly, the court found the failure to comply with the Compliance Notices was deliberate.

In addition to the penalties, the court ordered the companies to rectify outstanding entitlements and pay interest.

This was not the first compliance issue for one of the entities, which had previously faced penalties for failing to follow a Compliance Notice.

 

Why This Matters for Business Owners

There are three key takeaways from this case.

1. A Compliance Notice Is Not a Warning — It Is a Legal Direction

Once issued, a Compliance Notice requires action within a specified timeframe.

Ignoring it does not make it go away. In fact, it significantly increases the risk of court proceedings and additional penalties — often far exceeding the original underpayment.

2. Directors Can Be Personally Penalised

In this case, the director was fined individually for involvement in the contraventions.

Many business owners assume that operating through a company structure shields them from personal liability. Workplace law does not always work that way. Where individuals are knowingly involved in breaches, personal penalties can apply.

3. Underpayments Are Only Part of the Risk

The original underpayment amount was around $58,600.

The total penalties imposed exceeded $112,000.

That does not include:

• Legal costs
• Management time
• Reputational damage
• Business disruption

The financial exposure quickly multiplied.

 

A Practical Reminder for Employers

Most compliance issues don’t begin with deliberate wrongdoing. They begin with:

• Misinterpreting an Award
• Payroll errors
• Poor record-keeping
• Lack of internal checks

The real risk arises when concerns are raised and not addressed properly.

If your business receives a request for assistance from an employee or contact from the Fair Work Ombudsman, early action and proper advice are critical.

 

Preventing This in Your Business

To reduce risk, businesses should:

• Conduct regular Award and payroll reviews
• Ensure annual leave accruals are correctly calculated and paid on termination
• Maintain accurate time and wage records
• Respond promptly to any regulator communication
• Seek advice before small issues become larger ones

A proactive compliance check is almost always less costly than reactive litigation.

 

The Bigger Picture

Regulators have been clear: failure to comply with workplace obligations, particularly after being formally notified, will attract enforcement action.

The message from this case is simple.

• Underpayments can happen.
• Ignoring them is what turns them into serious financial consequences.

If you are unsure whether your payroll practices, Award interpretations or leave calculations are compliant, now is the time to review them, before a regulator does it for you.