The Fair Work Ombudsman will take Na Xu and the company she majority owns, Grandcity Travel & Tour Pty Ltd, based in Glen Waverley, to the Federal Circuit Court in October.

The Ombudsman will allege the company and Ms Xu breached contracting laws when it hired a 24-year-old Chinese migrant worker on an independent contractor agreement and told her she was operating her own business.

The worker was told to sign a contractor agreement and was paid flat rates of between $9 and $11 an hour for the work she performed from January to September last year. She was required to work six days a week. The worker was told if she did not sign the agreement she may lose her job, court documents say.

The Ombudsman alleges the worker should have been classified as an employee. Her minimum hourly rate, penalties for holidays and weekend work and her casual loading were all underpaid to the tune of $16,756 over that period.

The Ombudsman says the worker should have been considered an employee because of the level of direction and control the company had over the worker's duties and its directions on when she attended work.

Fair Work Ombudsman Natalie James said all employers should be aware that simply calling a worker a "contractor" and requiring them to obtain an ABN does not automatically make them a contractor under workplace laws.

"Where we suspect misclassification or sham contracting is occurring, we will look behind the often carefully drafted legal documents to determine the true state of affairs for affected workers," Ms James said.

Breaches of superannuation, record-keeping and pay slip laws are also alleged.

The FWO will allege Ms Xu was aware of the difference between employees and contractors and that she was aware of workplace laws that require employees to be paid minimum wages and other employee entitlements.

Last year the Fair Work Ombudsman issued Ms Xu with a Letter of Caution over her use of "contractor" agreements with another young Chinese migrant.

Ms Xu at the time told Fair Work inspectors she could not afford employee wage rates.

Ms Xu faces maximum penalties of up to $10,200 per contravention, while the company faces penalties of up to $51,000 per breach.

The FWO will seek court orders that the company back pay the worker in full and notify all workers employed since October 2012 of the proceedings.

A directions hearing is listed for October 27.

Ms James said the worker's age and vulnerability and Ms Xu's failure to rectify the alleged underpayment were significant factors in the decision to commence legal action.

Ms James said contracting arrangements can be appropriate, but could not be used to reduce payments to workers who performed specified duties at specified times under direction from an employer.

Anyone seeking assistance with employee or employer wages and conditions can contact  the Fair Work Ombudsman on 13 13 94.