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Woolworths share price lower on class action news

The Woolworths Group Ltd (ASX: WOW) share price is trading lower on Monday following a class action announcement.

In morning trade the retail conglomerate’s shares are down slightly to $39.68.

What did Woolworths announce?

This morning Woolworths revealed that it has been notified that Canberra law firm Adero Law has announced its intention to file employee class action proceedings against it in the Federal Court of Australia.

This class action is in relation to payment shortfalls to Woolworths salaried store team members covered by the General Retail Industry Award.

Adero Law is launching the class action despite Woolworths committing to fully rectify all payment shortfalls to current and former salaried team members as soon as possible. This includes interest and superannuation contributions.

In today’s release, the company advised that it continues to work towards making interim payments to impacted current and former staff (including superannuation contributions and interest) before Christmas for the two years reviewed to date.

In light of this and its commitment to fully remediate all affected salaried team members, Woolworths “believes the class action proceedings are without merit.” It has committed to fully defend the proceedings.

The company once again reiterated that it estimates the one-off impact for remediation to be in the range of $200 million to $300 million before tax. A further update will be provided when it releases its first half results in February.

What did Adero Law say?

Adero Law doesn’t agree with Woolworths’ estimates and alleges that the scale of underpayments is far greater than it has disclosed.

It said: “Based on 12 months of due diligence investigations, Adero considers that the underpayments disclosed by Woolworths to date substantially understate the wages owed which Adero estimates at $620 million.”

“This underreporting is likely due to errors in the principles that are applied within the Woolworths self-audit and the fact that Woolworths, in many instances, failed to keep accurate time and attendance records as required by the Fair Work Act 2009 which hinders the identification of overtime hours worked. For this reason, Adero considers the oversight of the Federal Court necessary to accurately settle this matter.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.