FWO takes action against Coles Supermarkets

The Fair Work Ombudsman has commenced legal action against Coles Supermarkets Australia Pty Ltd (Coles), alleging it underpaid more than 7,500 salaried employees a total of $115 million.

Coles Group Limited disclosed to the FWO and the Australian Securities Exchange in 2020 that it was reviewing the pay of award-covered, salaried employees in its liquor and supermarket businesses.

The Fair Work Ombudsman assessed the wages and entitlements of thousands of salaried Coles employees, finding Coles had allegedly underpaid 7,812 employees a total of $115.2 million between 1 January 2017 and 31 March 2020.

The FWO alleges that most of the underpayments were the result of Coles paying salaried employees annual salaries that were insufficient to cover their minimum lawful entitlements, given they generally performed significant amounts of overtime work.

The FWO alleges Coles’ remediation program has significantly underestimated amounts owed to the employees and that more than $108 million remains outstanding.

Fair Work Ombudsman Sandra Parker said underpayments resulting from insufficient annual salaries for employees covered by awards had become a persistent issue among businesses of all sizes, across a number of different industries.

“Businesses paying annual salaries cannot take a ‘set-and-forget’ approach to paying their workers. Employers must ensure wages being paid are sufficient to cover all minimum lawful entitlements for the hours their employees are actually working and the work they are actually doing,” Ms Parker said.

Ms Parker said that ensuring remediation programs were being undertaken correctly by large employers reporting underpayments was a priority for the FWO.

“This court action against Coles should serve as a warning to all employers that they can face serious consequences if they do not prioritise workplace law compliance,” Ms Parker said.

The allegedly underpaid Coles employees were located in regional and metropolitan areas across every state and territory. Most were responsible for managing a department or function within a Coles supermarket, such as bakery, customer service, delicatessen, dry goods, fresh produce, meat and night-fill.

The alleged underpayment of these salaried managers ranges from small amounts to $471,647 and it is alleged that 45 of them were underpaid more than $100,000.

It is alleged that most of the underpayments relate to overtime entitlements under the General Retail Industry Award 2010. The FWO alleges Coles’ salaried managers were generally contracted and rostered to work 40 hours per week but often worked more hours, with salaried managers alleged to have worked an average of approximately one hour in addition to their rostered hours per shift between October 2017 and March 2020.

The FWO alleges that weekend and public holiday penalty rates, allowances and a range of other entitlements were also underpaid.

It is also alleged that Coles breached record-keeping laws under the Fair Work Act by failing to keep proper records, including some records relating to overtime hours worked by employees.

For the alleged underpayments related to overtime, the FWO will allege that the reverse onus provisions of the Protecting Vulnerable Workers amendments to the Fair Work Act should apply and that Coles should be required to disprove the allegations.

The FWO is seeking penalties against Coles for multiple alleged breaches of workplace laws, in addition to a court order requiring the company to rectify the total outstanding underpayments in full, (plus interest and superannuation). The company faces penalties of up to $63,000 per breach.

A directions hearing in the Federal Court in Sydney is still to be scheduled.

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