Coles, Woolworths likely to pay hundreds of millions more in underpayment saga

Australia’s two supermarket giants are facing additional costs that will run close to a cumulative $1 billion, following last week’s Federal Court judgment in proceedings brought against the two listed entities.

Last Friday (5 September), the Federal Court delivered a scathing judgment in the underpayment proceedings brought against Coles and Woolworths, having found there was a lack of factual foundation to support specific findings.

Coles and Woolworths employees who alleged they were underpaid expected to learn whether they would be entitled to compensation on Friday (5 September) morning – instead, the Federal Court sent them back to a case management hearing to iron out several concerns.

Both Coles and Woolworths have already made remediation payments – $7 million and $300 million, respectively – but employees have argued for more, largely because of a disagreement on clauses within the award, contracts, and the Fair Work Act.

There were four separate proceedings that ran together on similar issues: two from the Fair Work Commission against each of the major supermarkets, and two class actions filed by Adero Law.

In Friday’s judgment, Justice Nye Perram was unable to deal with a large majority of the issues in dispute across all four proceedings due to the “insufficient linking of legal issues with factual disputes”.

In statements issued yesterday morning (8 September), both Coles and Woolworths provided updates to investors, flagging the likely increase in costs over the proceedings.

Coles

Coles has noted that it is “progressing work to understand and quantify the potential implications of the decision for our business”.

The judgment in the proceedings is complex, the company noted, and several issues regarding the interpretation of the General Retail Industry Award 2010 (GRIA) remain outstanding and will require further court hearings to determine.

In its statement yesterday, Coles issued a preliminary estimate that further remediation of between $150 million and $250 million “may be required to reflect the findings of the court”, which would include interest and on-costs.

“The range has been calculated based on the underpayments alleged by the FWO relating to historical work patterns, adjusted and extrapolated for the period for which Coles has committed to remediation and the broader population of affected salaried team members covered by the GRIA across Coles’ supermarkets business. It also reflects a potential adjustment for the period since Coles’ initial remediation process was conducted,” the supermarket’s statement said.

Woolworths

Based on the preliminary review of the court’s reasons published on Friday, Woolworths Group wrote to its shareholders, the supermarket said it estimates that the one-off additional impact of the court’s findings, in relation to its potential liability for further remediation to salaried store team leaders, “is expected to 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,” Woolworths added.

The estimate of further potential liability, it noted, includes the impact on salaried store team members, minimum breaks, and treatment of leave as it pertains to overtime, as well as further remediation related to historical underpayments from 2013 to 2019.

“This is a very preliminary estimate with significant uncertainty, and is based on a historical analysis of clocked time and attendance records,” Woolworths said.

Woolworths also said that it is “too early to consider any appeal of any aspects of the decision”.

The judgment will, however, “require significant and widespread changes to accepted retail practice for Woolworths Group and Australian businesses, large and small”, the supermarket wrote.

“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.”