Personally Liable: When Employment Problems Follow Directors Home

(Employed for 5 hours - over $11,000 in costs…)

Recent Employment Relations Authority decisions provide a timely reminder that employment liabilities do not always stop with the company. We look at four recent cases where directors were pursued personally — and one where they successfully defended the claim.

Most business owners understand the basic idea of a limited liability company: the company employs the staff, signs the contracts and carries the liability - But it is not an impenetrable shield.

Four recent Employment Relations Authority decisions illustrate this point, where directors have been dragged personally into the outcome - in an expensive way.

In September 2025, AEC Design Studio engaged a recent interior design graduate, referred to as JXU, for a casual three-day job assisting at an exhibition.

On the second day, 5hrs into her employment, an argument developed over a visitor's business card. The company's sole director told JXU to leave and, when she refused because her shift had not finished, he called security and had her removed from the venue.

The Employment Relations Authority found there was no substantive reason provided for her dismissal and effectively no disciplinary process at all. JXU was awarded $446.50 in unpaid wages, $35.72 holiday pay and $12,000 compensation (with the compensation reduced by 25% to $9,000 for her contribution to the events).

AEC was also penalised $2,000 for breaches of employment standards (There was no employment agreement in place etc.). More importantly for directors, the Authority found sole director Cheng Tih Lee had been knowingly concerned in the breaches. It ordered that, to the extent AEC was unable or unwilling to meet the payments ordered, Mr Lee was liable to make them.

For what started as a three-day, 19hr casual engagement, that is quite an outcome - that does not necessarily suggest that the law itself is suddenly changing direction. The relevant provisions for director liability have existed for years. But it is certainly happening regularly enough to make company directors pay attention, because this is not an isolated example.

Sleaktek Limited’s chief executive, Juliet Hull, stopped receiving her salary after the business encountered financial difficulty. The company's sole director, Robert Lawrence, personally made the decision that other payments would take priority over her wages.

A restructure followed, which the Authority found had been predetermined. Sleaktek later attempted to rely on serious-misconduct allegations which had not properly been put to Ms Hull before her employment ended.

The eventual orders against Sleaktek included $45,000 compensation, $50,000 lost remuneration and more than $86,000 in wages, notice and holiday-pay entitlements, plus penalties and interest.

Mr Lawrence was separately ordered to pay a $1,500 penalty because of his personal involvement in the failure to pay. The Authority also granted Ms Hull permission to recover unpaid wages and holiday pay from him personally, in the case that Sleaktek is unable to pay them.

The important point is not simply that the company got employment matters wrong. It is that the director personally made and implemented decisions which contributed to the breaches - potentially putting him in the firing line for over $180,000 in costs.

The figures can escalate quickly where it can be proven that minimum employment standards were deliberately breached. Earlier this year, The Indian Taste (restaurant) was ordered to pay almost $200,000 in refunds, wage and holiday-pay arrears to seven migrant workers - with its former director separately ordered to pay $177,300 in penalties. In the case that the company was unable to pay its arrears, the former director was personally liable for those too - a total potential bill of over $377,000.

The Authority described the breaches as persistent, systemic and deliberate. Employees had regularly worked 60 - 80 hours per week while being paid for around 30 hours and had also been required to pay unlawful premiums to secure employment.

In the case of the St Arnaud Alpine Store, the employer and its sole director admitted a range of minimum-wage, holiday, leave and recordkeeping breaches involving more than $108,000 owed to employees. The Authority initially imposed penalties of $91,000 against the company and $45,500 against the director. On challenge, the Employment Court reduced those amounts because of their financial circumstances, but the director was still personally left with a $15,000 penalty.

Operating through a limited company does not necessarily mean every employment liability stops with the company. But personal liability is not automatic - There is an important counterpoint.

In another recent case involving Aether Pacific Pharmaceuticals, the company entered liquidation owing money to its former chief operating officer. He pursued three directors personally for unpaid salary and holiday entitlements.

The Authority found the company had failed to make two final salary payments, but it did not hold the directors personally liable.

The non-executive directors did not know the relevant facts surrounding the missed payments. The director who had acted as CEO believed the payments had been processed and had payslips indicating that they had. The Authority also accepted evidence that the directors had relied on professional accounting advice regarding the company's finances and could rely on the statutory defence available where reasonable steps have been taken or appropriate professional advice has reasonably been relied upon. That distinction matters - being a director does not automatically make you personally responsible every time the company loses an employment case.

In each of these scenarios the business was found to have acted substantively in the wrong - In some cases nefariously so.

Whether those outcomes seem fair, harsh or entirely justified is ultimately beside the point. The broader message is clear: accountability can extend beyond the company and reach the people making the decisions. Because, as recent cases demonstrate, the question is no longer simply what the mistake might cost the company - It may be whether the problem follows the director home.