Article by Jennifer Holdstock
Staff at leading supermarkets, Woolworths and Coles have been underpaid for overtime, penalty rates periods and allowances, according to the Federal Court in a landmark decision handed down last week.
The case was a combination of four separate proceedings, two class actions and a case brought by the Fair Work Ombudsman against both Coles and Woolworths. The cases were ultimately heard together because of the common issues that needed to be determined. One of the relevant considerations for the Court was set off clauses that are commonplace in workplace agreements that say that the employer is allowed to set off any amounts over and above the award that the person is making in relation to their salary from one pay period to the next. The Court said that you cannot do so over a 12-month period. It can only be done within a relevant pay period. This means that you are unable to carry forward hours that a staff member has worked to be offset in the future.
Justice Perram of the Federal Court[1], in a 200-page decision, found that Coles and Woolworths had systematically underpaid full time contracted employees predominantly in store management roles. The number of affected staff put to the Court by the Fair Work Ombudsman were:
- 19,000 for Woolworths for dates between 17 June 2015 to 30 September 2019; and
- 8,767 from 1 January 2017 to 31 March 2020 for Coles.
The reason they have been underpaid is due to the operation of certain contract clauses and their ability to set off or offset the annual salaries against any shortfall generated by entitlements under the relevant award.
Contracted or salaried employees are paid an annual salary for a standard 38-hour week, and usually contracts say they are to work a reasonable number of extra hours, as required, in order to get the job done.
In reality, the supermarkets failed to keep records for those staff members to record the actual amount of overtime, or days and hours that they worked, in order to ascertain whether they were paid in accordance with the relevant award.
The relevant award is the General Retail Industry Award (2020), which provides that a full-time worker is to work a 38-hour week. The staff who led the class action and staff who were reporting to the Fair Work Ombudsman about their systematic underpayment, said they would routinely work upwards of 45 hours a week, and some store managers in particular, were working between 50 and 60 hours a week and effectively being underpaid, because their salary related to a 38-hour week.
As in this case, the important takeaway for employers is:
- to check that your record keeping is detailed and up to date, and that all records of staff doing overtime and penalty rates and allowances that people are entitled to under the relevant award are recorded, notwithstanding people might be employed on a contract where they are paid a salary that is over the award minimums that are required.
- It is important that employers are made aware that just because somebody is on a salaried contract, it does not mean that you do not need to keep records in relation to the days and hours that staff work.
Following this decision, all employers across any industry should be taking a close look at the record keeping requirements.
Given the significance of this decision, it is expected that the amounts that the supermarkets will have to pay back will be in the hundreds of millions of dollars.
The Court is yet to determine the amount that needs to be paid back and any penalties that Coles and Woolworths will face, and a further hearing has been scheduled in October to decide the next steps in the proceeding.
Coles has already indicated it may appeal the decision.
[1] Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092