Workplace insight: mitigating underpayment risks, the Woolworths saga

05 August 2021

Self-disclosure first occurred in early 2019, with the Fair Work Ombudsman (FWO) recently instigating court action against Woolworths for what it alleges to be at least $713,395.00 in outstanding wages still owed to its salaried employees.

How does this happen?

Following an investigation undertaken by the FWO shortly after Woolworths self-disclosed its underpayment, an investigation revealed that there was a failure to ensure that annual salaries were sufficient when compared to the actual hours worked. This left the salaried managers significantly underpaid from individual managers ranging from being underpaid $289.00 to $85,905.00 each during just one of the years audited.

The investigation revealed that on or around 19,000 salaried managers by the two Woolworths companies were underpaid for the period from June 2015 to September 2019 (including full-time and part-time employees) from each state and territory.

The FWO allege that Woolworths failed to make or keep records with details of the overtime hours worked for these managers.

The alleged failure of Woolworths to ensure that the salaried managers were working the hours contemplated by their annual salaries being at least equivalent to the minimum terms of the Retail Award has led to these underpayments.

Take away for employers

The key for businesses to avoid inadvertent underpayments, particularly in relation to those employees that are engaged on an annualised salary basis is to ensure that their salary is at least equal to their minimum entitlements for all hours of work in accordance with their applicable Modern Award (or applicable Industrial Instrument).

In addition, businesses should be at all times, complying with their record keeping obligations set out in the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth). Relevantly, these require that employers keep records of including but not limited to:

  • hours of work;
  • overtime;
  • leave; and
  • averaging of hours etc.

Businesses ought to undertake regular audits of at least yearly, if not half-yearly to ensure the salaried employees are working no more than the hours that their annualised salary contemplated. If the Modern Award is difficult to interpret, business ought to obtain legal advice on the interpretation of such clauses.

With wage theft being introduced in Queensland and Victoria, it is crucial that if any underpayment is discovered that the business seek legal advice as a matter of priority and this process will usually involve the lawyers liaising with the FWO in relation to the identified underpayments.

If you are unsure whether your businesses current payroll practices are meeting your minimum obligations to your employees, feel free to reach out to the HWL Ebsworth Workplace Relations and Safety team to discuss.

This article was written by Heinz Lepahe, Partner and Michelle Chadburn, Senior Associate.


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