Woolworths pleads guilty in $1.1-million wage underpayment case

Magistrate questions delay in rectifying issues found in payroll system

Woolworths pleads guilty in $1.1-million wage underpayment case

Woolworths Group has pleaded guilty to underpaying its employees by over AU$1 million (NZ$1.1 million), affecting about 1,200 workers.

The confession came during a session at the Melbourne Magistrates Court, which followed a tumultuous week that saw the company’s chief executive threatened with imprisonment.

According to 1News, the company, which self-reported the payroll errors after a 2022 internal review, faces a maximum penalty of AU$10 billion (NZ$10.9 billion) for failing to pay former employees their due long service leave entitlements. These underpayments occurred on 3,617 separate instances between January 2020 and July 2022, involving staff from Woolworths and its subsidiary, Woolstar.

Kathleen Crennan, representing the Wage Inspectorate Victoria, argued that despite Woolworths’ self-reporting, the size and resources of the corporation warranted expectations of better payroll management to prevent such discrepancies. The inspectorate had filed over 1,000 charges against the retailer, marking a significant legal challenge.

“With a corporation of these resources, across jurisdictions, there’s really no excuse for this to have happened,” said Crennan as quoted by 1News.

Calls for fair compensation

In court, Woolworths’ defence counsel Saul Holt KC highlighted the company’s cooperation with the investigation and its swift action to reimburse the affected former employees. Woolworths has reached most of these workers through various communication means, including texts, emails, and direct bank transactions for those uncontactable via other methods.

Holt described the proposed AU$10 billion penalty as “extraordinary” and cautioned that such a high penalty could deter other companies from voluntarily reporting similar discrepancies. He underscored the importance of encouraging companies to address and rectify payment anomalies proactively.

“There’s an incredibly important policy imperative in encouraging employers ... to say when ‘we find anomalies, we’re not just going to fix them in the future, we’re going to go back and check,’” said Holt.

Despite this, Magistrate Nahrain Warda questioned the delay in identifying the payroll system failures, pointing out that Woolworths had only commenced thorough checks for anomalies in 2020 despite switching to a new payroll system four years earlier. This lapse indicated a significant oversight in operational vigilance, according to the magistrate.

 “Why is it not until 2020 that the testing is, in essence, to ensure there are no anomalies? One would think that would be ongoing,” said the magistrate.

Woolworths is scheduled for sentencing on April 24, where the court will decide the final penalty for the retail giant’s payroll oversight. The case has stirred discussions about the responsibilities of large employers and the importance of accurate payroll practices to ensure workers receive their rightful earnings.

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