COURT FINDS DIRECTOR OF DEREGISTERED COMPANY LIABLE FOR UNPAID WAGES
On 27 May 2022, Judge Forbes of the Federal Circuit and Family Court of Australia delivered a landmark decision in Nino v Kuksal [2022] FedCFamC2G 401 on the ability of the workers to claim against officers of the company personally.
The case involved claims brought by eight international students against their former employer Mr Kuksal and two entities owned and controlled by him. The applicants alleged that they were either not paid or underpaid for cleaning, housekeeping and related duties they carried out in the course of their employment.
The applicants invoked the small claims procedure provided for in section 548 of the Fair Work Act 2009 (Cth) (the Act), which allows workers to recover employment entitlements up to $20,000 and to settle some other minor disputes utilising a simplified procedure.
Since the two entities which employed the applicants were deregistered following the conclusion of their employment, the applicants had to rely on the accessory liability provisions in section 550 of the Act to succeed against Mr Kuksal personally, which traditionally were not able to be used in small claims proceedings (See Beer v Lim [2012] FMCA 524, where it was held the Court did not have power to make an order against an accessory in a small claim proceeding).
Judge Forbes held that Beer v Lim [2012] FMCA 524 was incorrectly decided and confirmed that the Court has power to make orders in respect of unpaid wages against an officer who was involved in a contravention as an accessory in a small claim. At [105] to [107], Judge Forbes held:
Pursuant to section 539 an employee may make an application to the Court for an order in relation to a contravention of a civil remedy provision. An application for an order against a person who is deemed a contravenor by reason of section 550 is a species of application which an employee can make pursuant to section 539.
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An application for a compensatory order against an accessory which has been initiated pursuant to section 539, can at the applicants’ election be dealt with as a small claim proceeding under s 548.
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In a proceeding being dealt with as a small claim procedure under s 548 of the FW Act the Court has jurisdiction to make a compensatory order against a person involved in a contravention of a civil remedy provision.
The decision removes previously existing hurdles to claims for unpaid wages where the corporate employer is deregistered. Whereas the deregistration of the corporate employer would previously be the end of a claim for unpaid wages, employees can now pursue the employer’s director or any other person involved in the contravention to pay those wages personally up to the jurisdictional limit of $20,000 per claim. The Act does not limit the class of people against whom such an order can be made, save that the person must be involved in the contravention by way of aiding, abetting, counselling, procuring, conspiring or knowingly being concerned in it. Given the serious consequences of this decision, it is more important than ever to ensure wages payments are up-to-date and to seek urgent advice when a shortfall is discovered.