Woolworths and Coles face more than $1 billion bill after court finds widespread underpayments

Australia’s two largest supermarket chains have been ordered to confront more than $1 billion in potential repayments and related costs after a Federal Court judge found they underpaid thousands of salaried store managers for years.

Justice Nye Perram ruled that Woolworths Group and Coles did not meet their obligations to keep accurate employment records and paid managers flat salaries without tracking entitlements required under the retail award. The judgment, issued Friday, addresses systemic failures in how both companies recorded and paid for employees’ hours and entitlements.

Woolworths said on Monday it estimated a further liability of between A$250 million and A$470 million to salaried store leaders, with interest, superannuation and payroll tax adding another A$200 million to A$280 million — producing a pre-tax exposure of about A$750 million and an after-tax estimate of roughly A$530 million. The company cautioned the figures were preliminary and based on historical analysis of clocked time and attendance records.

Coles put its estimate at A$150 million to A$250 million to address the court’s findings in addition to A$31 million it has already remediated. Coles reiterated its apology on Monday.

The Fair Work Ombudsman brought the class actions against the retailers on behalf of small groups of salaried managers, with the Woolworths case covering 32 managers at five locations in Sydney, Melbourne and Brisbane between June 2015 and September 2019, and the Coles case involving 42 managers from 2017 to 2020, some of whom worked in multiple shops. Justice Perram will hold a case management hearing on October 27 to determine next steps and compensation arrangements for about 27,700 affected employees identified by the court.

Woolworths said the ruling would require "significant and widespread changes" to accepted retail practice not only within the group but across Australian businesses, large and small. The company also said it was too early to consider appealing any aspect of the complex decision, which spans roughly 82,000 words.

The judgment centres on the difference between salaried arrangements and the retail industry award that governs entitlements such as overtime, penalty rates and record-keeping obligations. According to the ruling, both retailers paid bundled salaries without adequate mechanisms to track or pay additional entitlements when managers worked hours that should have attracted award-based payments.

The October case management hearing will set the process for determining who among the broader set of employees will receive compensation and how remediation will be calculated. The Federal Court’s decision could have wider implications for employment and payroll practices across the Australian retail sector, since many employers use salaried arrangements for store leaders and supervisors.

Legal and workplace relations experts said the ruling highlights the risks companies face when relying on fixed salaries rather than recording hours and entitlements under applicable awards. The Fair Work Ombudsman initiated the proceedings to test whether such salaried arrangements met legal requirements and, in this instance, found they did not.

Both supermarket groups have previously undertaken remediation programs for various underpayment claims and have faced scrutiny over payroll practices in recent years. The latest court finding formalises a significant liability for the industry and establishes legal precedent on the recording and payment of entitlements under the retail award.

The companies and the Fair Work Ombudsman did not provide further comment beyond their public statements. The Federal Court will provide further directions following the October 27 hearing, which will outline the timetable and framework for calculating and delivering compensation to affected workers.