Woolworths and Coles, two major supermarket chains in Australia, have announced significant potential remediation costs amounting to hundreds of millions of dollars following a recent Federal Court ruling regarding staff underpayment. The court’s decision, made last week, impacts nearly 30,000 employees and stems from allegations that both companies permitted illegal practices across numerous stores.
The ruling identified deficiencies in how the supermarkets managed staff payments, with an emphasis on the tacit approval of unlawful conduct. In response to the findings, Woolworths disclosed to the Australian Securities Exchange (ASX) that its expected additional payments to salaried store team leaders could range between $180 million and $330 million after tax. Additionally, Woolworths anticipates that further costs, which may include superannuation, payroll tax, and interest, could bring the total remediation to between $320 million and $550 million. The company acknowledged that these estimates are preliminary and could be subject to substantial revision.
Coles, likewise involved in the class action ruling, estimates its remediation obligations will fall between $150 million and $250 million. The company cautioned investors against overly relying on these figures, highlighting that the specifics of the ruling may apply differently to its circumstances.
Both supermarkets have previously reimbursed significant sums to management staff who were not compensated according to their entitlements, with Woolworths returning $330 million and Coles $7 million. The Fair Work Ombudsman, along with former grocery employees engaged in two class actions, contends that the supermarkets should be liable for higher compensation payments. The Ombudsman has raised concerns over work conditions, including failures in roster management, overtime tracking, and record-keeping practices, which contributed to employee underpayment.
Woolworths has stated that some employees were permitted to work up to 45 hours per week and were not expected to exceed that limit. In contrast, Coles has argued that its managers possessed the discretion to manage their hours, asserting that the Fair Work Ombudsman’s estimates of employees’ working hours and days may have been exaggerated.
As these issues unfold, both Woolworths and Coles are under pressure to rectify past payment discrepancies while navigating the aftermath of the court ruling. The situation highlights ongoing challenges in ensuring fair remuneration practices within major retail chains in Australia.