Woolworths and Coles say the Federal Court ruling handed down on Friday (5 September) on historical underpayments of award-covered salaried store team leaders could result in one-off costs up to $1 billion dollars.
The Fair Work Ombudsman (FWO) commenced the legal action against the retailers in 2021 regarding employees whose annualised salary arrangements did not cover the amount of overtime they had worked.
Justice Nye Perram found that since 2013, the two had not recorded overtime correctly for 28,000 employees and had been also underpaid rates and penalties. It affected roughly 9000 Coles employees and 19,000 at Woolworths.
Woolworths said the decision would require “significant and widespread changes to accepted retail practice” for the group and Australian businesses of all sizes.
“The Group has already undertaken an extensive remediation for its affected salaried store leaders, drawing on team member records and contractual arrangements, expert external guidance and industry standard approaches to construction of the award,” it said in a statement to the ASX.
The retailer said it expected the potential liability for further remediation to salaried store team leaders would be in the range of $180 to $330 million post tax ($250 to $470 million pre-tax).
“Once the final remediation obligation is determined, interest, superannuation and payroll tax could add another $140 to $200 million post tax ($200 to $280 million pre-tax) to the net liability,” it said.
Woolworths said it was a “very preliminary estimate with significant uncertainty”, based on a historical analysis of clocked time and attendance records.
“Further detailed review and modelling of team member records and consideration of the Court’s decision is required to determine the full financial impact.”
Coles told the ASX it was working through and quantifying the judgement, noting a number of issues on the interpretation of the General Retail Industry Award 2010 (GRIA) remained outstanding and required further court hearings to determine.
It said its preliminary estimate for remediation was between $150 million and $250 million to reflect the findings of the Court, including interest and on-costs. The range has been calculated based on the underpayments alleged by the FWO
In its review of the decision, King & Wood Mallesons said the decision requires employers to “take stock” of employee salaries that are covered by an industrial instrument and “carefully consider potential vulnerabilities in their payroll compliance framework”.
“These matters warrant serious consideration at the leadership level, given the significant civil and criminal consequences that may arise both for organisations and individuals involved in serious contraventions and intentional underpayments,” the legal firm said.
Under changes to the law in 2017, Justice Perram’s finding that the retailers had failed to keep complete records meant the onus was on them to disprove additional underpayment claims brought by the Fair Work Ombudsman and class action firm Adero.
The Australian Retail Association (ARA) said the decision will increase the cost and compliance burden on retail businesses, undermine productivity, and curtail career opportunities.
ARA CEO, Chris Rodwell, said the emerging impacts for the broader sector were “alarming” and will create a heavier regulatory burden.
“This judgement is likely to impact the future distinction between hourly paid and senior salaried employees. For example, salaried team members who are paid above $90,000 per year must be treated in the same way as a more junior worker who is paid hourly,” Rodwell said.
“This will likely push retailers of all sizes to stop preferencing salaried arrangements, which undermines secure employment and career choices for retail workers.
“In an era where the government and unions seek more secure work, unfortunately the opposite will be achieved if salaried arrangements are made to be practically unworkable,” he said.
But Rodwell said it was important to stress this wasn’t just about retailers. “Employees deserve clarity, too. Workers have the right to understand their pay and conditions clearly and simply.”
He called the GRIA “profoundly complex”, and the case was a compelling one for award simplification.
“With 994 different pay rates across almost 100 pages, the GRIA is incredibly difficult for employers to understand. It is clearly not fit-for-purpose for larger employers. The expectation that smaller mum-and-dad operated businesses, who lack legal and HR resources, can use the award appropriately is entirely unreasonable.
“If it requires teams of lawyers and HR experts to interpret the GRIA, it’s clear the system is broken, and it is setting up businesses to fail,” Rodwell said.
A case management conference has been listed for 27 October to look at issues not determined in the judgement.
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.
