Workers underpaid by employers will have a better chance of getting money owed to them after a "groundbreaking" court decision. 

The Federal Circuit and Family Court of Australia has ruled that individuals, not just employers, can also now be named in small claims cases — applications to recover unpaid wages and entitlements up to $20,000. 

"Now, vulnerable workers can name the person who employed them as a third party in their small claim applications – and have a much higher success rate of recovering their entitlements," said Gabrielle Marchetti, principal lawyer at employment rights centre JobWatch.

The decision overturns a 10-year legal precedent and was made as part of a JobWatch underpayment case, which remains before the court and has been listed for further hearings in July.

In that case, eight international students alleged they were unpaid or underpaid, with amounts ranging between $675 and $7,256 each, for work that included cleaning, housekeeping and other duties related to accommodation.

Ms Marchetti described the decision as "groundbreaking" and said it meant more people would actually receive unpaid wages after a court order.

"In our view, this will result in greater access to justice," she said.

"Too often, our clients in small claims matters have been hampered by having court orders made only against the employer and not against any accessories.

But Ms Marchetti agreed the decision was not a silver bullet for recovering unpaid wages because individuals could still move money to avoid paying debts.

"But … it's a move in the right direction, it is going to make it harder for employers to avoid paying what the court has said they need to pay," she said. 

Former international student Vaishnavi Lella was one of several underpaid workers who spoke out about issues with the small claims process last month, using her own experiences to illustrate the problems with the system.

On Wednesday, Ms Lella welcomed the court's decision.

"The court ruling will definitely encourage more workers who have been underpaid to take action against their employers," she said.

Employment Rights Legal Service coordinator Sharmilla Bargon described the court decision as a "huge win" for underpaid workers.

"This decision will make it one step easier for workers to get what they are owed," Ms Bargon said.

"We hope that this decision will also provide workers [with] protection against 'phoenixing': where an employer closes a business, avoids paying employee wages, declares insolvency, and then sets up a new company under a new name and hires new workers."

But Ms Bargon said further reform is still needed to protect vulnerable migrant workers, including an "efficient, accessible, and inexpensive" dispute resolution mechanism for workers to recover all unpaid entitlements and superannuation.

"In addition … the jurisdictional limit of the small claims process [should be] to be increased from $20,000 to $30,000 to allow more people to benefit from the process, and to allow penalties to be ordered against employers," she said.