The Federal Court has dismissed efforts by Coles and Woolworths to reduce the amount of compensation owed to thousands of store managers who were underpaid for years. The judgment marks a significant setback for the supermarket chains, both of which argued they had already made payments above award minimums that should offset any unpaid overtime.
Justice Nye Perram delivered a lengthy 863-paragraph decision, finding the retailers had not complied with their record-keeping obligations. The matter will return to court in October for case management, with the judge observing that the approach taken by the parties had unnecessarily complicated proceedings.
The Fair Work Ombudsman (FWO) has alleged widespread underpayment: Woolworths is said to have short-changed around 19,000 store managers, while Coles failed to properly pay 8,767 of its staff. To date, Woolworths has repaid $330 million and Coles more than $7 million. However, the FWO and class action representatives insist these sums do not fully cover the money owed. The disagreement centres on how certain award clauses should be interpreted and whether excess salary payments can cancel out unpaid overtime.
At the core of the dispute is the concept of “set-off”. Woolworths claimed that an employee’s pay should be looked at across the entire year. If a worker earned more than the award minimum in most pay cycles, the company argued, those additional payments could balance out any failure to pay overtime during other periods.
The court rejected this argument. It ruled that where overtime was worked but not paid, those entitlements must still be met, regardless of whether the employee had received higher overall wages in other pay cycles. In effect, Woolworths remained contractually bound to pay the agreed salary, and unpaid overtime could not simply be absorbed by earlier overpayments.
Coles advanced a similar defence, contending that failing to allow offsets would lead to double compensation. This reasoning was also dismissed. The court determined that employees are entitled both to their contracted salary and to the additional amounts required under the award. Any suggestion that paying both would constitute duplication was described as relying on a misinterpretation of employment contracts and award provisions.
The decision has significant implications for the scale of compensation the two retailers must provide. Both Coles and Woolworths have indicated they are reviewing the judgment, but the ruling has already reinforced the expectation that large employers must adhere strictly to award requirements and cannot rely on broad offsetting arguments to minimise underpayment claims.
In a separate case, the Federal Court also upheld the Fair Work Commission’s approval of a multi-employer bargaining authorisation involving three coal mining companies: Whitehaven, Peabody and Ulan. Although the union involved has since shifted its focus to single-enterprise agreements, the court’s support for the authorisation has been welcomed by unions as a boost to collective bargaining rights.
Employer groups, however, have warned that the decision could set a precedent that threatens to weaken enterprise bargaining arrangements and discourage investment. They argue that multi-employer bargaining in sectors such as mining could increase industrial complexity and reduce the flexibility businesses need to operate effectively.
For unions, the ruling represents an important step in expanding the reach of collective negotiations. They maintain that stronger bargaining rights are necessary to ensure fair pay and conditions across industries where power imbalances between employers and workers are most pronounced.
Together, these two Federal Court decisions underline the changing industrial relations landscape in Australia. For Coles and Woolworths, the outcome highlights the risk of non-compliance with workplace laws and the potential financial consequences of underpayments, even when substantial remediation payments have already been made. For the mining industry, the judgment on multi-employer bargaining signals a shift towards broader collective agreements, despite resistance from some employers.
As both cases progress, they will continue to shape the expectations placed on large employers. Retailers and resource companies alike will be under growing pressure to meet not only the letter of employment contracts but also the full spirit of workplace laws designed to protect workers.
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