Woolworths (ASX:WOW) share price slides amid legal stoush on underpayments

The regulator alleges the supermarket giant has not fully repaid up to 19,000 underpaid employees.

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Man in business attire holding up red card to denote a fine

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Woolworths Group Ltd (ASX: WOW) shares have fallen into the red today as the Fair Work Ombudsman (FWO) takes the retailing giant to court.

After opening higher at $43.54, shares in the company have been on a slide this morning and are currently down 1.50%, trading at $42.70. In contrast, the S&P/ASX 200 Index (ASX: XJO) is 0.5% higher.

Let’s take a closer look at today’s news.

Underpayment claims rock Woolworths

The FWO confirmed today it would begin legal proceedings against Woolworths in relation to the alleged underpayments of up to 19,000 managers between 2015 and 2019. Woolworths disclosed this issue to the ASX in 2019 and pledged to rectify the situation.

The problem revolves around its salaried employees and underpayments for overtime, annual leave loading and meal allowances, as afforded by the relevant award. Woolworths admitted the underpayments in 2019 and said it would need to pay up to $600 million to its store and department managers.

The FWO alleges Woolworths did not fully repay managers, and as such, will take the company to court. Taking a sample of 70 managers for a period of 12 months, the Ombudsman claims Woolworths has paid only around $400,000 of the approximately $1.2 million owed to these managers.

The FWO also alleges the supermarket giant still owes one employee almost $86,000 for the 12-month period it examined.

Fair Work Ombudsman Sarah Parker said today’s actions were a “priority” for the regulator.

“This court action highlights that large employers face serious consequences if they do not prioritise workplace law compliance among other aspects of their business,” she said.

What did Woolworths say?

In a statement to the ASX, Woolworths acknowledged the actions of the FWO and said it was “reviewing the proceedings.”

The company says there is “considerable uncertainty” surrounding underpayments and that it “welcomes the opportunity to have the Federal Court clarify the complex legal issues involved, including the interpretation and application of provisions of the General Retail Industry Award.”

Woolworths claims to have paid $370 million to date to its affected employees, and that work is “continuing” in this space.

Woolworth shares snapshot

Over the past 12 months, the Woolworths share price has increased 17.8%. Like many in the consumer staples sector, the company fared comparatively well during the COVID pandemic, as grocery sales spiked due to panic buying and supermarkets were among the few places people could visit to shop during lockdowns.

Woolworths Group has a market capitalisation of $54.5 billion.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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