Following the discovery and self disclosure of systems failures that resulted in the underpayment of store and department managers, wherein the salary modelling did not align with the actual hours worked, the Fair Work Ombudsman has today commenced legal action in the Federal Court against Woolworths Group Limited and Woolworths (South Australia) Pty Limited despite back payments already made of more than $400,000.

Woolworths identified the issue and disclosed it to the Fair Work Ombudsman and the Australian Securities Exchange in 2019.  The underpayments came as a result of staff being paid a salary that included provision for ordinary hours and some overtime, however the actual hours that the staff worked was in excess of the modelling, resulting in the underpayments.

The regulator then investigated the underpayments of the managers and assessed the records of a sample of 70 in-store salaried managers for their work between March 2018 and March 2019.

The FWO alleges that Woolworths Group Limited underpaid those 70 employees 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 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.

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. All employers can contact the Fair Work Ombudsman if they need assistance complying with Australia’s workplace laws,” Ms Parker said.

The FWO alleges the two companies’ annual salary modelling did not completely provide for all employee entitlements, given the additional  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 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.