Coles (ASX:COL) hauled to court over $115 million in underpayments

Supermarket allegedly owes its employees big time, including one staffer who missed out on $470,000 of salary.

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Supermarket giant Coles Group Ltd (ASX: COL) will face the Federal Court after the Fair Work Ombudsman accused it of short-changing employees more than $115 million.

The Ombudsman analysed past payouts to “thousands” of salaried staffers after Coles last year announced to the ASX it would review their pay.

That analysis found the supermarket had allegedly underpaid 7,812 employees a total of $115.2 million between the start of 2017 and 31 March 2020.

Coles staff allegedly not paid for overtime

According to the Ombudsman, the shortfall was caused by Coles paying annual salaries that were not enough to cover the significant amount of overtime these employees do.

“This court action against Coles should serve as a warning to all employers that they can face serious consequences if they do not prioritise workplace law compliance,” said Fair Work Ombudsman Sandra Parker.

“Businesses paying annual salaries cannot take a set-and-forget approach to paying their workers. Employers must ensure wages being paid are sufficient to cover all minimum lawful entitlements for the hours their employees are actually working and the work they are actually doing.”

Insufficient annual salaries for employees covered by awards has become a “persistent issue” among many companies, according to the Ombudsman.

Incredibly, one Coles worker was allegedly short-changed $471,647 while 45 employees were underpaid more than $100,000.

Supermarket accused of not keeping proper records

Coles has already had an underpayment remediation scheme in place, but the FWO alleged it “significantly underestimated” the money owed to staff. More than $108 million still remains outstanding.

Most of the allegedly underpaid employees were those managing a department or a function within the supermarket, such as bakery, customer service, or delicatessen.

The impacted staffers were located both in regional and metropolitan stores, across all states and territories.

Coles also faces allegations that it didn’t keep proper records, including documentation relating to overtime hours.

In an announcement to the ASX on Thursday afternoon, Coles acknowledged FWO’s court case and said it had apologised to the impacted employees.

“Coles is currently reviewing the proceedings, which include issues relating to the interpretation and application of various provisions of the General Retail Industry Award 2010,” its statement read.

“To the extent that further remediation may be required, we will update the market accordingly.”

A Federal Court directions hearing in Sydney is yet to be scheduled.

FWO is pursuing penalties against Coles for breaching workplace laws, plus a court order to force it to backpay affected staff with interest.

Coles shares were trading at $17.63 on Thursday afternoon, down 4.7% for the year so far.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. 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 COLESGROUP DEF SET. 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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