By: Laura Gavan and Kirsty Easdale
Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092
The Federal Court of Australia has delivered a significant decision in Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092.
The decision includes a number of key takeaways for employers on award compliance, record keeping, overtime, and set-off clauses. While the supermarket giants are likely to appeal, the ruling signals a potential increase in underpayment claims for salaried employees.
What is the decision about?
The decision by Justice Perram of the Federal Court of Australia is the judgment for four separate proceedings – two regulatory enforcement proceedings commenced by the Fair Work Ombudsman (FWO) against Woolworths and Coles, and two class actions commenced by employees working for Woolworths and Coles.
In short, all of the proceedings alleged that salaried managers employed by the retailers were paid an annualised salary that was not sufficient to satisfy their entitlements under the General Retail Industry Award 2010 (Award).
What does the decision say that employers and insureds need to know?
The lengthy, 201 page decision makes a number of findings for which employers and insureds should take urgent action. We have set a summary of some of the most critical findings from an underpayments compliance perspective below. Note that the table is not intended as an exhaustive summary of all the findings made by Justice Perram, noting that the majority of findings concerned technical interpretation issues specific to the Award.
| Issue | Finding | Implications | What do employers need to do? |
|---|---|---|---|
| Offsets and annual salaries | Employment entitlements must be paid in full within each pay period (i.e. each pay cycle).
This means that where employees are paid in excess of their entitlements, but in a different pay period, those overpayments cannot be used to offset underpayments in an earlier pay period. This finding turned on the interpretation of section 323(1) of the Fair Work Act 2009 (Cth). This section requires employers to pay an employee ‘in full’ and at least monthly. |
Employers relying on set off clauses to offset any underpayments in one pay period against over award payments in another pay period may be exposed to an underpayment claim. | Employers should satisfy themselves that salary payments satisfy all entitlements arising in that pay period. Particular attention should be paid to pay periods where employees are entitled to annual leave loading, perform overtime or work during periods attracting penalties and loadings. |
| Record keeping | The retailers did not meet their record keeping obligations for salaried employees, as they did not keep records specifying penalty rates, loadings and overtime hours as required by the Fair Work Regulations 2009 (Cth).
Coles and Woolworths argued that they did not have an obligation to keep these records because the employees were paid an all-inclusive salary. The clock in and out data relied on by the retailers was insufficient for this purpose, and it was not readily accessible for a Fair Work Inspector or available for inspection by an employee. Relying on employees to create their own records of overtime hours worked is insufficient. |
Paying an all-inclusive salary does not excuse employers from keeping pay and overtime records in accordance with the regulations. Employers cannot merely rely on employees to create their own overtime records using clocking data. | Ensure that they have records of overtime hours worked by salaried employees that are in a form readily accessible to employees and the regulator. Review how overtime hours are recorded, and whether employers have an independent method of verifying hours worked outside of employee self-declaration. |
| Agreements under awards | Where an employee can agree to forgo an entitlement under an award, the objective circumstances must show that the employee was aware of the entitlement and agreed to forgo it.
An example of such a clause is ‘an employee’s roster for a given day may be changed by mutual agreement with the employee.’ The onus of proving such an agreement exists sits with the employer. Woolworths argued that a time off in lieu policy was sufficient for this purpose. The Court held that it was not, and that evidence an employee was aware of the right they were forgoing was required. |
Employers should not rely on policies and procedures to evidence agreement by an employee to forgo an entitlement under an award.
Employers must be able to show that employees: • were aware of the entitlement; and To satisfy the evidential burden on employers in this regard, employers should have written evidence of the agreement with the employee. |
Employers covered by awards should identify what clauses of their award permit agreement by an employee to forgo a right. Employers should then review their procedures to confirm that where these agreements are entered into, the employer has sufficient, objective evidence of the agreement. |
Other key takeaways
The decision also has some noteworthy things to say about the Award, which may have flow on effects for the interpretation of other modern awards as well. Importantly:
Overtime: The Court held that where a salaried employee works outside of their roster, they are not automatically entitled to overtime. Rather, the question is to what extent the hours worked outside of the roster were mutually agreed to, or whether the hours worked were required because of work that the employer required to be done. The burden is on the employer to prove that the additional time worked outside of the roster was not reasonably required.
No general principle that penalties are not paid on penalties: The parties asked the Court to determine what rates were payable when an employee has a less than 12 hour break between shifts. The clause under the Award requires an employer to pay an employee ‘double the rate they would be entitled to until such time as they are released from duty for a period of 12 consecutive hours.’ The retailers argued that there was a general principle under the terms of the Award that penalties are not paid on penalties, and that the rate was double the minimum hourly rate, not double all entitlements including overtime. The Court found no such general principle exists, but that double time in this particular context referred to double the minimum hourly rate of pay.
Conclusion
Underpayment risk continues to be notoriously difficult for employers and insureds to navigate, and following the criminalisation of wage theft in January this year, the consequences of getting it wrong are more serious than ever before. We are seeing a very active legal environment for underpayments at the moment, including increased risk for large employers in the class action space and an increasing number of other employment claims (such as general protections claims) including allegations of unpaid overtime and other entitlements.
The current climate calls for employers and insureds to take a much more proactive approach to ensuring entitlements compliance, including for salaried employees, every pay period. Key items on the agenda must include moving away from broad sweeping set off clauses for salaried employees and no longer relying purely on employee clocking data to record overtime.
If you would like to know more about how Justice Perram’s decision might apply to you, or to discuss strategies for improving entitlements compliance in your workplace, please contact the authors.
Key Contacts & Updates
For guidance on workplace issues, please contact Chris Mossman, Sian Gilbert, Laura Gavan or Kirsty Easdale.
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