The supermarket giants issue preliminary cost estimates after landmark ruling
Australia's two largest supermarkets are estimating hundreds of millions of additional remediation costs after a landmark ruling from the Federal Court last week over salary underpayments.
The Federal Court ruled on Friday that Woolworths and Coles breached Fair Work Regulations after failing to record overtime hours of up to 28,000 salaried managers from 2013.
Woolworths said that a "very preliminary estimate" of the one-off impact of the ruling would be between $180 and $330 million post-tax.
"Once the final remediation obligation is determined, interest, superannuation and payroll tax could add another $140 to $200 million post-tax ($200 to $280 million pre-tax) to the net liability," it said in a statement to the Aiustralian Stock Exchange on Monday.
The estimation covers the assessment of the impact on all salaried team members, minimum breaks, and treatment of leave in relation to overtime.
"This is a very preliminary estimate with significant uncertainty, and is based on a historical analysis of clocked time and attendance records," Woolworths said.
"This decision will require significant and widespread changes to accepted retail practice for Woolworths Group and Australian businesses, large and small."
Coles said in its statement that the Federal Court's decision would potentially mean further remediation of between $150 million and $250 million.
"Coles cautions the market from relying on speculative estimates which may not have adequate regard to the application of the decision to Coles' specific circumstances," it said in the statement.
Additional remediation
These hundreds of millions of dollars from the supermarket giants add to the millions that they have already paid from previous remediation programs,
Coles said it has paid $31 million of remediation costs, while Woolworths said it has made repayments of more than $330 million.
These repayments stem from previous remediation programs by both supermarket companies in relation to the General Retail Industry Award 2010 (GRIA).
But the Fair Work Ombudsman, and class actions, argued that these programs nderestimated the owed amounts to affected employees.
On Friday, the Federal Court ruled that they failed to comply with their record-keeping obligations under the Fair Work Regulations.
It also ruled that the set-off clause, which refers to the practice of simultaneously satisfying obligations arising under an award or enterprise agreement and a contract through a single payment, can only operate within a single pay period and cannot be used to offset underpayments in one period with overpayments in another.
The Australian Retailers Association (ARA) said the decision demonstrates the challenges that the retail sector faces in complying with the GRIA.
"With 994 different pay rates across almost 100 pages, the GRIA is incredibly difficult for employers to understand," said ARA chief executive Chris Rodwell in a statement.
"If it requires teams of lawyers and HR experts to interpret the GRIA, it's clear the system is broken, and it is setting up businesses to fail."
