Two Malaysian workers of Chinese descent in Australia on temporary visas were deliberately exploited, underpaid and discriminated against by a Tasmanian hotel operator because of their race, a Federal Circuit Court judge has ruled.

Key points: Chef on 457 visa was made to work six days a week and was underpaid $20,550

Chef on 457 visa was made to work six days a week and was underpaid $20,550 Kitchen-hand on spousal visa was underpaid $8,775 and quit due to heavy workload

Kitchen-hand on spousal visa was underpaid $8,775 and quit due to heavy workload Former hotel operator found to have discriminated against couple because of race was fined $211,104

The landmark outcome of action by the Fair Work Ombudsman's first racial discrimination litigation has seen the now former hotel operator fined a total of $211,104 in what has been described as "an uncomfortable truth" about the exploitation of migrant workers on 457 visas.

In the case, the ombudsman proved that Chang Yen Chang — who owned the Scamander Beach Resort Hotel on Tasmania's east coast until 2014 — treated husband and wife Malaysian employees Kien Hoong Loh and Kah Yoon Low differently to Australian staff by underpaying them more than $28,000.

The court found that as general manager Chang breached racial discrimination provisions of the Fair Work Act when he exploited their vulnerability and poor language skills, forced them to work extra hours without pay and failed to record their hours of work.

During a contested four-day hearing, evidence was presented to establish that the couple's Chinese race and Malaysian national extraction was a "substantial and operative reason" why Chang and his company had discriminated against them.

The court heard Chang exploited his Chinese cultural connection with the couple and referred to them as "family" to put pressure on them to work hard for him.

Chang denied the claims but Judge Barbara Baker found that Chang and his company "made a deliberate decision to treat [the Malaysian couple] differently to other employees".

"Mr Chang was well aware of his obligations to pay them their entitlements under the relevant awards. They were taken advantage of, coming from Malaysia and being of Chinese descent," Judge Baker said.

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Judge Baker found Chang had recruited employees from Malaysia "in part because he knew a Malaysian would accept working six days a week and he knew that it was usual in Malaysia to work six or seven days".

Fair Work Ombudsman Natalie James said the case highlighted underlying racial discrimination in the exploitation of migrant workers in Australia, which is "unlawful and completely unacceptable".

"It is an uncomfortable truth that racial discrimination is a driver behind some of the exploitation of migrant workers in this country," Ms James said.

Fair Work Ombudsman Natalie James. ( ABC News )

"The court's ruling in this matter sends a message that singling out migrant workers for exploitation is serious unlawful conduct and significant penalties apply.

"We are actively seeking to dispel the myth that it's OK to pay overseas workers a 'going rate' that undercuts the lawful minimum wage rates that apply in Australia."

Fair Work compared the case of the Malaysian couple with the treatment of 15 other casual workers who were of Caucasian race and Australian nationals where penalties for other contraventions are being sought.

However, the court heard that Chang's workers of Caucasian extraction where not required to work as many hours and were paid minimum rates, penalty rates and loadings in accordance with the hospitality industry award.

Mr Loh was recruited through an advertisement in a Malaysian newspaper in 2007 and Chang's company sponsored him on a 457 skilled worker visa to work as head chef in the hotel's restaurant.

Worker owed over $8,000

The court heard Mr Loh was required to work six days per week and his hours sometimes reached 57 hours over a week, with him often starting work when the restaurant opened for lunch and finishing after it closed for dinner.

Mr Loh was paid an annual salary of $45,240 to $46,280, which the court ruled was not sufficient to cover the penalty rates he was entitled to for weekend, public holiday, evening and overtime work given an underpayment of $20,550.

His wife Ms Low was on a spousal visa and employed as a kitchen-hand in the restaurant where she was required to work between 35 and 51 hours per week.

Ms Low was paid a flat rate of between $446 and $594 per week — about half of what she was entitled to — leading to an underpayment of $8,775 over a period of four months.

Ms Low told the court that she quit after finding the workload too much.

Chang was fined $35,099 and his company Yenida Pty Ltd has been penalised a further $176,005.

Ms James said her office would seek penalties for workers who racially discriminate and underpay workers and would take court action where necessary.

Under the Fair Work Act, the Fair Work Ombudsman can investigate discrimination against employees on the grounds of pregnancy, race, colour, sex, sexual preference or age.

The act also covers physical or mental disability, marital status, family or carer responsibilities, religion, political opinion, national extraction or social origin.

Follow Peter Ryan on Twitter @peter_f_ryan