Three times unlucky for non-compliant Woolworths

The Fair Work Ombudsman had every reason to be “shocked” at recent admissions by grocery giant Woolworths that it has shortchanged employees by up to $300 million.

The regulator, Sandra Parker, was not just shocked that Woolworths had joined that long list of major companies found to be underpaying staff – a list that has included such stalwarts as Wesfarmers, Super Retail Group, Michael Hill Jewellers, Domino’s Pizza and 7-Eleven. 

It was more even than what she described as the “massive scale” of the breach of Australian workplace laws.

What made the breach so outrageous to her was that this latest disclosure was the third major wages issue involving Woolworths.

When employees are worse off

The retailer has previously tested the regulator over trolley collection contractors exploiting workers for the supermarkets.

Subsequently, Woolworths was found to have shortchanged some employees in an enterprise bargaining agreement (EBA) which it had negotiated with the Shop Distributive and Allied Employees Association (SDA), a deal that failed to meet Fair Work Act requirements that no employee should be worse off than previously under any new agreement.

Woolworths is yet to fully quantify the current underpayments of salaried staff against entitlements under the Grocery Industry Retail Award, but the retailer estimates the shortfall on wages to be between $200 million and $300 million, and says it believes that the underpayments date back to 2010.

Woolworths claims that the underpayments were detected under a review following the implementation of a new EBA for its supermarkets and Metro stores. 

However, the Retail and Fast Food Workers Union claims that store employees discovered and reported the underpayments.

Woolworths casual staff and the union also identified the discrepancy that left some employees with lower wage entitlements than they had before a new EBA was signed off by Woolworths and the SDA.

Moving beyond self-disclosure

The Fair Work Ombudsman has indicated that the office will conduct an investigation in relation to Woolworth’ self-disclosure and “hold them to account for breaching workplace laws”.

The investigation is expected to check whether employees of other Woolworths businesses were also underpaid – that would include workers at Endeavour Drinks, Big W and Dick Smith.

Woolworths CEO Brad Banducci has indicated the company will itself undertake checks of its other businesses to ensure they also have not breached workplace laws.

The regulator will also want to determine that there are not more than the 5700 employees Woolies has identified as being shortchanged, including people who no longer work for the company.

Parker has expressed frustration at the number of large companies that have not classified staff correctly, or have not paid overtime or penalty rates or completed annual pay reconciliations where they are required.

Woolworths’ mea culpa – an unreserved apology for “letting down its team” and back payments with interest for affected employees – may not be enough to avoid penalties, future audits or other compliance checks.

Parker says that while the regulator encourages corporates to cooperate with it to rectify breaches, “they must understand that admission is not absolution”. 

“Companies should expect that breaking workplace laws will end in a public court-enforcement outcome,” she warns.

“Companies and their boards are on notice that we will consider the full range of enforcement options available under the Fair Work Act, including court-enforceable undertakings and litigation where appropriate,” Parker said last week following the Woolworths announcement.

Being sorry is not enough

While many of the instances of underpayment of wages and entitlements have not been deliberate, Parker is adamant that non-compliance with workplace laws results from ineffective governance combined with complacency and carelessness towards employee entitlements.

In 2010, the Fair Work Commission started an award modernisation program, yet the retail, fast food and pharmacy awards all remain complicated because of casual and part-time employee arrangements and complex staff rosters that incorporate penalty rates.

However, some of the companies like Woolworths, have negotiated enterprise agreements that create new provisions or modify the relevant industry awards to suit the operational demands of the business.

That is one of the things that truly puzzles the Fair Work Ombudsman – how can a retailer fail to meet the provisions it has negotiated itself.

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