Coles accused of underpaying more than 7,500 workers by $115m

Supermarket giant Coles is being hauled to court accused of shortchanging more than 7,500 workers by $115m.

The Fair Work Ombudsman alleges Coles underpaid 7,812 employees between January 2017 and March 2020, some of them by up to $471,647.

Most of the underpayments, totalling $115.2m, relate to overtime entitlements for salaried managers at supermarkets and liquor stores in each state and territory.

Forty-five managers were allegedly short-changed by more than $100,000 each.

Coles reported itself to the FWO for underpayment last year and began a remediation scheme, but the FWO alleges the company’s program “has significantly underestimated amounts owed to the employees and that more than $108 million remains outstanding”.

It comes after the FWO in June launched federal court action against Coles’ main competitor, Woolworths, accusing it of under-paying managers by up to $85,905 a year. Woolworths also reported itself to the FWO, telling the regulator in 2019 that it had underpaid thousands of staff.

Coles will face the federal court accused of unlawfully failing to keep proper records including related to employees’ overtime hours.

The FWO’s lawsuits against both Coles and Woolworths revolve around how the pay of managers who are on salaries is calculated and paid.

Supermarket managers are paid a rolled-up wage but their employers are required to ensure this is more than the amount they would have been entitled to if they were paid by the hour under the retail award.

“Businesses paying annual salaries cannot take a ‘set-and-forget’ approach to paying their workers,” the Fair Work Ombudsman, Sandra Parker, said on Thursday.

“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.”

The FWO alleges Coles managers were generally rostered and paid to work 40 hours a week but often worked longer. It claims that between October 2017 and March last year salaried managers worked an average of an extra hour per shift.

Penalty rates for working on weekends and public holidays were also allegedly underpaid, along with other allowances and entitlements.

The FWO argues that changes to the law in 2017, made in response to worker exploitation in franchised businesses, mean that the normal legal onus of proof is reversed.

This would mean Coles is required to disprove the allegations, rather than the FWO proving them.

Coles faces penalties of up to $63,000 per breach proven.

In a statement to the stock exchange, the company said it was “currently reviewing the proceedings”.

“To the extent that further remediation may be required, we will update the market accordingly,” it said.