Supermarket giants Woolworths and Coles expect to spend hundreds of millions of dollars more to repay staff who were underpaid, following a Federal Court ruling that could push total costs past $1 billion. Woolworths has flagged potential additional costs exceeding $500 million after tax, while Coles estimates up to $250 million, on top of $330 million and $31 million already repaid respectively.
The Federal Court on Friday found both companies failed to keep accurate employment records and underpaid nearly 30,000 employees under annual salary arrangements. Justice Nye Perram ruled that employers must pay entitlements each pay period and cannot offset overpayments against future periods.
The Fair Work Ombudsman launched the action in 2021, alleging the supermarkets' annual salaries did not cover overtime, penalty rates, and allowances under the General Retail Industry Award. A further hearing in late October will determine outcomes for affected workers.
Legal experts warn the decision has wide-reaching implications for Australian businesses. Woolworths stated it requires significant changes to accepted retail practice, while King & Wood Mallesons lawyers said employers relying on contractual set-off provisions should promptly review their payroll systems.
The Australian Retailers Association criticized the ruling, warning it will increase compliance costs and reduce flexibility for senior employees. Chief executive Chris Rodwell called for the Fair Work Commission to modernize award rules.
