Woolworths taken to court by Fair Work Ombudsman for underpaying managers

The Fair Work Ombudsman’s case alleges 70 managers were underpaid $1.17m, but it could cost Woolworths much more.

The court action alleges underpayments its supermarkets and Metro stores. Picture David Clark

The Fair Work Ombudsman has launched legal action in the Federal Court against Woolworths alleging underpayments of salaried managers, in a case linked to the supermarket giant’s admission in 2019 that it had short-changed as many as 6000 staff up to $300 million.

The new court action follows an investigation that found that a sample of 70 salaried managers were underpaid a total of $1.17m.

The regulator is seeking penalties against Woolworths and the payment of $713,395 still owing to the 70 managers, although a court win by the FWO could force repayments to many more underpaid staff.

The FWO alleges the most significant underpayments related to overtime entitlements, and that the sums involved ranged as high as $85,905 over a one-year period.

Woolworths, which says it has already repaid more than $370m to staff, said the legal action addressed issues over which there was “considerable uncertainty”.

When Australia’s largest supermarket operator admitted in 2019 that it had underpaid thousands of salaried employees in its supermarkets and Metro stores, it was just the latest in a long list of companies to admit failures.

However at the time, the Woolworths case was the largest involving underpaid wages by a public company.

It caused severe embarrassment for Woolworths and led to an apology by chairman Gordon Cairns and CEO Brad Banducci, while Mr Banducci also missed out on $2.6m in bonuses.

In June last year the size of Woolworths’ underpaid wages bill had risen since its first announcement to $500m, making it the biggest wages scandal in recent history.

Although the supermarket giant is not alone in admitting failing to pay workers their full entitlements — with other retailers such as Michael Hill, Coles, Target, Super Retail as well as the taxpayer-funded broadcaster ABC making similar confessions — the wages and interest

bill racked up at Woolworths dwarfs all others.

Following Woolworths’ admissions, the Fair Work Ombudsman investigated the records of a sample of 70 in-store salaried managers for their work between March 2018 and March 2019.

The FWO alleges Woolworths underpaid those 70 employees a total of $1,172,282 during this period. Despite back payments, $713,395 in underpayments remains outstanding, it alleges.

The FWO is seeking court orders for Woolworths Group and Woolworths (South Australia) to rectify the outstanding underpayments to the 70 managers.

It also wants both companies to then apply those calculation methods to rectify any underpayments owed to all other affected salaried managers, plus interest and superannuation.

“We allege that Woolworths failed to ensure that annual salaries were sufficient when compared to the actual hours worked, leaving their salaried managers significantly underpaid,” said Fair Work Ombudsman Sandra Parker.

“We also allege that significant underpayments have not been fully back-paid, and we will seek court orders for Woolworths to recalculate and rectify all underpayments for all affected employees,” Ms Parker said.

“This court action highlights that large employers face serious consequences if they do not prioritise workplace law compliance among other aspects of their business. All employers can contact the Fair Work Ombudsman if they need assistance complying with Australia’s workplace laws.”

Wooolworths CEO Brand Banducci has apologised for staff underpayments and says addressing the issue has been a priority. Picture: AAP

The FWO alleges the two companies’ annual salary arrangements did not cover employee entitlements for overtime rates, weekend and public holiday penalty rates, meal allowances and annual leave loading owed under the retail industry award.

The most significant alleged underpayments related to Woolworths’ failure to pay the correct overtime entitlements to these salaried managers.

The FWO alleges that the underpayments for the 70 managers range from $289 to $85,905 over a year. They were all full-time employees and based primarily in Sydney, Melbourne or Brisbane.

In total, there were about 19,000 salaried managers employed by the two Woolworths companies between June 2015 and September 2019, which included full-time and part-time employees from every state and territory.

The FWO also alleges that Woolworths and Woolworths (South Australia) failed to keep records of overtime hours worked or of penalty rates or monetary allowances.

Woolworths told the ASX it was reviewing the court proceedings, but added: They address issues over which there is considerable uncertainty.”

It said the remediation process so far had date has involved extensive review and it welcomed the opportunity to have the court “clarify the complex legal issues involved”.

Woolwoths said since 2019 it had paid more than $370m to staff, with remediation work continuing.

Mr Banducci said: “Since 2019 our highest priority has been, and continues to be, addressing the issue of underpayments for our team, and to ensure that it doesn’t happen again.

“We welcome the opportunity for further clarity from the court process on the correct interpretations of the relevant provisions.”