Australia’s two biggest supermarket chains may have to fork out more than $1 billion in repayments and other costs between them after a court ruled they underpaid thousands of salaried managers for years.
Friday’s Federal Court ruling would also require “significant and widespread changes” to accepted retail practice for both Woolworths Group and Australian businesses, large and small, the company said on Monday.
Justice Nye Perram on Friday ruled Woolworths and Coles did not comply with their obligation to keep accurate employment records and paid workers their salaries without tracking other entitlements owed under the retail award.
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Woolworths estimates that based on the judgement it will have to pay another $250 million to $470 million to salaried store leaders, with interest, superannuation and payroll taxes adding another $200 million to $280 million to its net liability.
That’s a total pre-tax liability of as much as $750 million for Woolworths, or $530 million after taxes.
“This is a very preliminary estimate with significant uncertainty, and is based on a historical analysis of clocked time and attendance records,” Woolworths said on Monday.
Coles estimates it will have to pay between $150 million to $250 million to address the court’s findings, on top of the $31 million in remediation it has already paid.
Coles reiterated its apology on Monday.
The Fair Work Ombudsman (FWO) brought the class action case against Woolworths on behalf of 32 managers at five locations across Sydney, Melbourne and Brisbane from June 2015 to September 2019.
The case against Coles involved 42 managers, some of whom were employed in multiple shops, from 2017 to 2020.
“The FWO acknowledges the important decision, which we are continuing to consider, and the guidance it will provide to workers and employers covered by the General Retail Industry Award, particularly where annualised salaries are used,” FWO Anna Booth told www.20304050.best in a statement.
“Annualised salaries must meet all employees’ minimum lawful entitlements.
“The FWO is continuing to seek court orders requiring Woolworths and Coles to rectify any outstanding underpayments in relation to thousands of affected employees across each of their workforces, plus interest and superannuation.”
Perram will conduct a case management hearing on October 27 to determine the next steps and compensation for the affected 27,700 employees.
Woolworths said it was too early to consider an appeal of any aspects of the complex decision, which spans 82,000 words.
The FWO is also seeking penalties against Woolworths and Coles in these proceedings.
Detailed records required
Employment and industrial law barristers Ian Neil SC said Australia’s biggest wages scandal had turned the spotlight on how major corporates treat their workforce.
“The central problem is that both companies paid annualised salaries to thousands of employees without maintaining the detailed records needed to ascertain that entitlements such as overtime, penalty rates, and shift allowances had actually been met,” he told www.20304050.best.
“The Federal Court has made clear that if you don’t keep those records, the onus is on the employer to prove everything was paid correctly. That’s a heavy onus, and in practice very difficult to discharge.
“This isn’t an issue confined to Coles or Woolworths, or even just the retail sector.
“Other industries where annualised salaries are common such as hospitality, construction and finance will need to take a very close look at their payroll and record-keeping systems.
“We will likely see a shift across all Australian industries towards much more rigorous compliance and auditing standards.”
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