Coles, Woolworths supermarkets facing more payouts to staff

Key arguments by Coles and Woolworths aimed at limiting payouts to workers have been rejected.

Woolworths and Coles have been found by the Federal Court not to have complied with their record-keeping obligations. Picture: NewsWire / Glenn Campbell

The Federal Court has rejected key arguments by Coles and Woolworths designed to limit the amount of compensation to be paid to thousands of store managers who were underpaid their legal entitlements for years.

The decision came as employers warned a separate judgment upholding a multi-employer bargaining authorisation covering three coal mines set a dangerous precedent that would undermine enterprise bargaining and investment.

In an 863-paragraph judgment released on Friday, Federal Court justice Nye Perram found the supermarket giants did not comply with their record-keeping obligations.

He listed the proceedings for case management in October, noting the approach taken by parties during the case had made the proceedings “unacceptably complex”.

The Fair Work Ombudsman alleged Woolworths underpaid about 19,000 store managers employees and that Coles underpaid 8767 employees.

While Woolworths has made $330m remediation payments to the workers and Coles paid over $7m, the FWO and applicants to two class actions claim they are owed more, with the dispute largely about the meaning of various award clauses.

One key issue in dispute was whether Woolworths and Coles could offset the amount they paid to workers annually in excess of the award minimum against failure to pay overtime to workers.

Woolworths argued the court should assess an employee’s compensation across the whole year to determine whether loss had been suffered and offset payments made in excess of the award against any unpaid overtime.

The court cited the example of a worker who was paid $2000 a fortnight, and the award minimum was $1800, meaning the worker received $200 over the award each fortnight.

For 21 fortnights, the worker works ordinary hours and receives $4200 in excess of the award. In the five other fortnights, the worker does $500 worth of overtime but is not paid for it.

Even if Woolworths was able to offset the $200 payment against the $500 in unpaid overtime it owed, the court said the company was still obliged to pay the employee $300 in each of those fortnights.

“Its failure to make these five $300 payments is a contravention of the award. The total underpayment is $1500,” the court said.

On other hand, across the 21 fortnights where it was only obliged to pay ordinary wages it paid $4200 more than it was obliged to under the award.

Woolworths argued that no compensation should be paid because the $4200 should be set off against the $1500 in unpaid overtime.

“I do not accept this submission,” the judge said. “The employee is to be restored to the position he or she would have been if the contraventions had not occurred.

“In that counterfactual, the employee would receive the $1500 for overtime but they would still have received their full salary of $2000 for the 26 fortnights. This is because Woolworths was always contractually obliged to pay the salary.”

Coles advanced similar arguments to Woolworths while also arguing its position should be upheld to “avoid double compensation”.

“There is no double compensation,” the court said. “In the counterfactual where Coles paid the employee’s entitlements it necessarily continued to pay the employee’s salary since it was contractually obliged to do so.

“There would only be double compensation if Coles elicited evidence (or the employment contract provided) that Coles was entitled to reduce its salary payments outside the payment periods.

“However, whilst this is what its contracts of employment provided for, this was not how they could lawfully operate.

“Coles’ double compensation submission only works when its erroneous understanding of the set-off clause is introduced into the counterfactual. However, for obvious reasons this cannot be done.”

Woolworths and Coles said they were reviewing the judgment.

Meanwhile, unions hailed a Federal Court ruling upholding a Fair Work Commission authorisation of multi-employer bargaining at three coal mining companies, Whitehaven, Peabody and Ulan, despite the union involved now pursuing single enterprise agreements.

ACTU secretary Sally McManus said the mining industry should stop being scared of the bargaining laws and focus on bargaining with their workers.