Mobile phone company 2degrees could be set to pay more than $1 million to its co-founder Simon "Tex'' Edwards after the Employment Relations Authority ruled the company had incorrectly cut his pay from $350,000 to $200,000 in 2008.

Mr Edwards had been paid the higher amount for a year in 2007, until 2degrees decided that a salary of no more than $200,000 was appropriate for his role.

The Employment Relations Authority has ruled that 2degrees make up the salary, plus interest, and pay Mr Edwards compensation and a $4000 penalty.

However Edwards failed in a bid to have a three-year notice period, instead the authority ruled he would only be given two months notice if his role was terminated.

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The authority also found that 2degrees wrongly stopped Mr Edwards from participating in an employee share option scheme.

The ERA left it up to the parties to resolve the question of how much compensation Mr Edwards would be awarded.

Mr Edwards was given notice of his job coming to an end, effective from July 12, but he remains employed by the company until an Employment Court hearing on whether the termination can be justified as redundancy.

The company said even though Mr Edwards had not signed a new employment agreement in 2008, agreeing to a 43 per cent drop in his salary and a two month notice period, "his conduct acquiesced in or affirmed'' changes to the agreement.

2degrees' chief operating officer Sean Dexter said Mr Edwards was reminded "numerous times'' to sign the new agreement, but he never did.

"... in around May 2008 Mr Dexter became impatient during a meeting and said, 'Tex, sign the f***ing agreement', frustrated apparently by Mr Edwards' continued refusal to sign the agreement,'' authority member Alastair Dumbleton said.

"Despite that level of resistance, 2degrees simply commenced paying him the lower salary.

"Relying on Mr Edwards' acceptance of it over a period of time was not sufficient to bring an agreement into existence.''

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Mr Edwards told the authority he had not taken action about his reduced pay because it was a relatively minor issue and he was "being an entrepreneur'' trying to deal with other more major issues.

Mr Dumbleton ordered 2degrees pay all underpayment of Mr Edwards' salary and five per cent interest.

A spokeswoman for 2degrees said the company would not comment on the decision.