Landmark Federal Court Decision: Woolworths and Coles found liable for systemic wage underpayments

In a landmark ruling handed down by Justice Perram in the Federal Court of Australia ([2025] FCA 1092), Woolworths Group Limited and Coles Supermarkets Australia Pty Ltd were found to have systematically underpaid thousands of salaried employees over several years.

The case, which consolidated regulatory proceedings initiated by the Fair Work Ombudsman and parallel class actions, has sent shockwaves through the retail sector and through employment generally.

The proceedings centred on salaried employees covered by the General Retail Industry Award 2010 (GRIA). Both Woolworths and Coles had employed staff under contracts that paid annualised salaries, without maintaining adequate records to ensure those salaries met, or exceeded, minimum entitlements under GRIA.

Justice Perram found that the employers failed to properly account for:

• Overtime,
• Penalty rates for weekends and public holidays,
• Allowances and other entitlements.

The employers relied on a “set-off” approach, assuming that the annual salary would cover all award entitlements. However, the Court clarified that a set-off arrangement must be assessed on a per-pay-period basis, not averaged across the year. This interpretation significantly increases the compliance burden for employers using annualised salary arrangements.

Award compliance must be granular and ongoing

Employers must ensure that annual salaries meet award entitlements in each pay cycle, not just in aggregated over the year.

Record-keeping is critical

The absence of detailed time and attendance records was a central issue in this case. Employers must maintain accurate records of hours worked, including overtime and penalty shifts.

Set-off clauses are not a set-and-forget shield

A contractual set-off clause does not absolve employers from their obligations under the Fair Work Act or relevant awards. Legal advice should be sought to ensure such clauses are enforceable and correctly applied.

Award complexity demands specialist oversight

GRIA alone contains hundreds of pay rates across nearly 40 pages of various arrangements. Employers should engage their internal Human Resources team, employment relations specialists or legal counsel to navigate award obligations.

Risk of regulatory scrutiny

This case demonstrates the growing willingness of regulators and employees to pursue underpayment claims. Employers must proactively audit their payroll practices to mitigate legal and reputational risk.

This case is a wake-up call for Australian employers. It underscores the importance of award literacy, robust payroll systems, and proactive compliance. Additionally, employer reliance on set-and-forget “set-off” clauses in contracts of employment will not protect the organisation.

In Justice Perram’s own words, “the basic problem common to each action is that the employees in question were employed under written contracts providing for an annual salary. Woolworths and Coles did not keep track of the entitlements of these employees under the Award and hence, in many cases, did not pay entitlements which the employees properly had.”

Further to this, when considering the ability of employers to apply their obligations over a 12 month or 6 month period, Justice Perram stated, “in summary my conclusions are that the clauses (set-off clauses) are only effective to discharge obligations under the Award within a single pay period”.

The cost of getting it wrong is no longer just financial; it is reputational, operational and legal.

If you have concerns or questions regarding Award and Payroll compliance, please contact us below and one of Workplace Strategists will be in touch within 24 hours.