Woolworths facing $390m bill over massive underpayment

Woolworths is facing the threat of a potentially massive payout as the Fair Work Ombudsman begins legal action against it in the Federal Court in relation to major underpayments of salaried managers mostly in Brisbane, Sydney and Melbourne.

Jun 18, 2021, updated Jun 18, 2021
Woolworths chief executive Brad Banducci . (File image)

Woolworths chief executive Brad Banducci . (File image)

Australia’s largest supermarket operator disclosed to the Fair Work Ombudsman and the Australian Securities Exchange in 2019 that it had underpaid thousands of salaried employees in its supermarkets and Metro stores.

The case dates back to revelations in 2019 when Woolworths has admitted underpaying thousands of its workers as much as $390 million over a past decade.

The FWO then investigated just a sample of 70 of its managers for their work between March 2018 and March 2019.

The sample found 70 employees were underpaid a total of $1,172,282 during this period. Despite back-payments, the FWO alleges that a total of $713,395 of underpayments remains outstanding to these employees.

The greater impact could be that Woolworths is forced to apply the same calculations done by the FWO across its entire salaried manager workforce  which is where the $390 million figure comes from.

“The FWO is seeking court orders for Woolworths Group Limited to rectify the total outstanding underpayments in relation to the 70 managers whose records were assessed – and for both companies to then apply those calculation methods to rectify any underpayments owed to all other affected salaried managers, plus interest and superannuation,’’ the FWO said.

Woolworths said there was considerable uncertainty about the case and it was seeking to clarify issues with the FWO.

It said $370 million had been paid to former and current salaried team members and work was continuing to remediate others.

Chief executive Brad Banducci said the company welcomed the opportunity to get clarity from the court process.

Fair Work Ombudsman Sandra Parker said that addressing allegations of non-compliance in the corporate sector and ensuring remediation programs were being undertaken correctly was a priority.

“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. 

“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.”

“This court action highlights that large employers face serious consequences if they do not prioritise workplace law compliance among other aspects of their business.’’ 

The FWO alleges the annual salary arrangements did not cover employee entitlements for various overtime rates, weekend and public holiday penalty rates, meal allowances and annual leave loading owed under the General Retail Industry Award 2010, given actual hours worked.

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 during the one-year timeframe. They were all full-time employees, engaged as team support, team managers or duty managers, 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 Group Limited and Woolworths (South Australia) Pty Limited failed to make or keep records which specified the number of overtime hours worked by the salaried managers or that detailed the loadings, penalty rates or monetary allowances applicable to the hours worked by the salaried managers.

The FWO is seeking orders for penalties against Woolworths Group Limited and Woolworths (South Australia) Pty Limited. A directions hearing in the Federal Court in Sydney is still to be scheduled.


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