Wage Compliance Lessons from the $135 Million Settlement: Why Prevention Pays

| December 19, 2025

The old saying goes, “An ounce of prevention is worth a pound of cure.” Nowhere is this truer than in the context of wage compliance and underpayments. 

In Australian Salaried Medical Officers’ Federation v Peninsula Health (No 4) [2025] FCA 1268 medical professionals and the State of Victoria reached agreement on a resolution to underpayments. The matter arose when 30 separate applications relating to underpayments were combined as one action on behalf of junior doctors who were expected to work unpaid overtime; undertaking tasks such as completing medical records, performing handovers and preparing for ward rounds and medical procedures.  

Resolution was reached prior to the class actions being heard in the Federal Court of Australia (FCA), with the FCA asked to give effect to the agreement reached by the parties.  

The Settlement and Its Scale

FCA’s Snaden J gave effect to a deed of resolution reached by the parties, and determined the matter on the papers. The FCA was asked only for orders under s 33V of the Federal Court of Australia Act 1976 (Cth) for approval of the global settlement reached. 

The amounts to be paid by the State of Victoria are: 

1. $135,000,000 of which around $430,000.00 is to be divided between the lead applications; with the remainder to be distributed amongst the group members who meet the criteria prescribed in the Deed;  

2. $20,802,489.68 to be paid in respect of Applicants’ legal costs and disbursements in the course of the proceedings; and  

3. $17,500,000 to be reserved for the costs of administering the distribution of funds to group members in accordance with the Settlement Scheme.  

Included in the above is $175,000 to be awarded to the Australian Salaried Medical Officers’ Federation (ASMOF), with Snaden J finding that there was no reason to treat ASMOF any differently from another corporate entity that brings a representative proceeding on its own behalf as well as that of a group. 

Further, Snaden J noted that it was clear that the ASMOF played a role for the benefit of all group members, and not only for those who were its members, and accordingly it could rightly look to the settlement sum for some form of compensation.  

In total, there were 12,846 group members who have registered their interest in the Settlement Scheme with the Applicants’ solicitors.  

With class actions, the amount paid to each member of the class is an approximation of damage attributed to the lead class members. This means that the amount paid by an employer may be more than the individual employee’s actual entitlement. 

While the obligation to pay wages properly will always exist, it is the added $20,802,489.68 in legal fees and the approximation of damages that pose a significant penalty for employers who are non-compliant.  

This settlement follows similar outcomes in NSW ($230 million settlement) and the ACT ($31.5 million settlement) in respect of unpaid overtime.  

Key Lesson for Employers

Beyond the direct cost of backpay, it’s the legal fees, administrative expenses, and reputational damage that often inflict the most harm on employers.

Underpayment cases frequently arise from classification errors, Award misinterpretation, or systemic payroll issues — all of which can be avoided through proactive compliance checks.

Why Prevention Pays Off

While the obligation to pay employees correctly is clear, the cost of getting it wrong is growing.
As class actions become more frequent and union scrutiny increases, employers who take preventive steps now will avoid the far greater cost of reactive litigation later.

At IRiQ Law, we help employers identify risks before they escalate through:

• Comprehensive payroll audits
• Award and classification mapping
• Governance and compliance reviews

Our services are designed to detect compliance gaps, confirm correct classifications, and ensure your business remains aligned with industrial obligations.

Contact us today to schedule a payroll audit or compliance review.