Cheng Li, former manager of the Heidelberg Angels in Melbourne's northeast, was instead sentenced to a three-year community corrections order.
County Court Judge Angela Ellis told the court Li had an obligation as manager to ensure all workers were adults.
"Putting it generously, you turned a blind eye," Judge Ellis said in her sentencing remarks on Monday.
"You allowed a vulnerable 16-year-old child to engage in sex work for your own financial reward."
Li's lack of prior criminal history, guilty plea and personal circumstances meant a corrections order would be sufficient punishment, Judge Ellis said.
Li, 35, was working as manager on the girl's first night at the brothel on August 27, 2019.
The girl, now 20, had been living in a Department of Human Services residential care unit when she responded to a Facebook ad for an assistant dominatrix.
Another man, called "Mike", contacted the girl asking for identification. She provided a photo of an altered learner's permit where she had changed her birth year from 2002 to 2092.
She was given the job at the Heidelberg Angels and chose the name "Pixie".
The girl was paid in cash for services she provided as a dominatrix, using whips and other toys on clients. On five occasions clients negotiated penetrative sex with the teen.
Police began investigating in September 2019 after receiving a tip-off.
CCTV footage showed the girl at the brothel over four days in late August 2019.
Li told police it was hard to remember who "Pixie" was and denied any of the workers were under 18.
The 35-year-old last month pleaded guilty to receiving payment for sexual services provided by a child.
The victim now had difficulties taking care of herself and had bad flashbacks of her time at the brothel, Judge Ellis noted on Monday.
It was clear she was traumatised by Li's crime and yet there was little evidence of remorse, Judge Ellis said.
"It's somewhat troubling and does not bode well for your prospects of rehabilitation," she said.
The judge found while Li was the primary caregiver to his two young children, his circumstances were not exceptional.
But Judge Ellis said she would not send Li to jail because of his lack of prior criminal history, his guilty plea and the additional burden he would experience in jail.
Li was instead convicted and sentenced to a three-year community corrections order with 400 hours of unpaid community work.
He will be on the sex offenders register for the next eight years.
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