URGENT UPDATE: A shocking underpayment scandal involving Australian grocery giants Coles and Woolworths is escalating, with both companies facing demands to repay tens of millions of dollars to over 30,000 current and former staff. This comes after a landmark ruling by Federal Court Justice Nye Perram on Friday morning, which exposed serious failures in payroll practices that have persisted for over a decade.
The court’s 204-page judgment revealed that both companies inadequately tracked employee entitlements, leading to widespread underpayments. Justice Perram stated, “The basic problem common to each action is that the employees in question were employed under written contracts providing for an annual salary.” This systemic issue has resulted in millions owed to employees who were not compensated for overtime, penalty rates, and other entitlements.
Coles and Woolworths have already repaid substantial amounts—Woolworths more than $486 million and Coles around $30.1 million—but the latest findings indicate they owe much more. The Federal Court has found that Coles underpaid 8,768 staff and Woolworths 19,000 workers, from store managers to department heads.
Justice Perram highlighted the gravity of the situation, indicating that the employees should be restored to their rightful financial positions, stating, “It is a payment in addition to the remuneration under the contract of employment and it is clear it is not a payment directly related to the performance of work.” He also ruled that the burden of proof regarding underpayment allegations falls on employers, intensifying the scrutiny on Coles and Woolworths.
The findings stemmed from four class actions initiated by Adero Law and the Fair Work Ombudsman in 2019 and 2020. Both companies neglected to maintain essential records of working hours, which should have been accessible for inspection, exacerbating the issue.
With the potential remediation costs now exceeding $547 million for Woolworths and an estimated $50 million for Coles, this scandal has transcended corporate history, marking it as the largest underpayment case ever documented by a court in Australia.
Adero Law’s managing principal, Rory Markham, emphasized the severity of the situation, stating, “The clear ‘evidentiary vacuum’ that Coles relied upon to conduct its HR and payroll system was a ‘calamity which belongs to Coles and not its employees.’” The judgment serves as a stark reminder for employers about the importance of meticulous payroll practices.
The repercussions of this ruling extend beyond financial penalties. Business lobby groups are responding to the implications of the judgment, calling attention to the complexities of the regulatory landscape. Australian Retailers Association chief executive Chris Rodwell criticized the current system, noting the difficulties faced by businesses in navigating the intricate pay rate structures.
Both supermarket giants have acknowledged the ruling, with Woolworths CEO Amanda Bardwell stating, “We are focused on resolving these underpayment issues. We are committed to ensuring that our team members are paid correctly.” Similarly, Coles is reviewing the judgment to assess its full impact.
A key hearing is scheduled for October 27 to determine the total remediation amount owed. With the stakes higher than ever, employees, legal experts, and the public will be watching closely as this unprecedented case unfolds, signaling a critical moment for labor rights in Australia.
Stay tuned as we continue to monitor this developing story, which has already caused significant reverberations across the retail sector and beyond.
