What’s impacting the Woolworths share price on Tuesday?

The supermarket could find itself in a colossal Federal Court proceeding.

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Key points

  • The Woolworths share price is seesawing on Tuesday amid news legal action brought against it and its rival, Coles, could be merged into a giant Federal Court case
  • The two supermarket giants are both facing regulatory action and class actions after admitting to the underpayment of staff
  • In his judgment, handed down on Friday, Federal Court judge Nye Perram flagged the possibility the cases could be heard as one

The Woolworths Group Ltd (ASX: WOW) share price is wobbling this morning amid news legal actions brought against the supermarket giant and its peer could fuse into a mammoth case.

The Federal Court flagged the two actions brought against Woolworths relating to the underpayment of 19,000 employees might be heard alongside two similar actions made against Coles Group Ltd (ASX: COL).  

At the time of writing, the Woolworths share price is $38.08, 0.37% lower than its previous close. However, it jumped into the green at $38.29 at market open.

For context, the S&P/ASX 200 Index (ASX: XJO) is down 0.08%, while the supermarket’s home sector – the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) – is slipping 0.09%.

Let’s take a closer look at what two of Australia’s iconic supermarkets could soon face in court.

Could this be impacting Woolworths’ stock today?

The Woolworths share price has been up and down in early trading amid reports two cases brought against the ASX 200 supermarket giant could be merged with two brought against Coles.

The Fair Work Ombudsmen launched its case against Woolies last year after the supermarket admitted to underpaying 19,000 employees by more than $570 million between 2015 and 2019. Woolies is also facing a class action on similar grounds.

That places it in a similar position to Coles, which is facing action from the ombudsmen in relation to the underpayment of 8,767 employees, as well as a class action.  

Now, the four cases could be merged into one. The trial — in whatever mode is later determined — is set to kick off in June 2023 and run for seven weeks.

The decision was handed down by Federal Court judge Nye Perram on Friday, hitting headlines after the market closed on Monday.

Justice Perram noted that, while the four actions overlap, they aren’t identical.

They can be divided into three issues –  tier 1, tier 2, and tier 3.

Tier 1 issues cover questions of law regarding the interpretation of the General Retail Industry Award, the Fair Work Act, and employment contracts.

Tier 2 issues are those within which questions of law mix with questions of fact. For instance, the position of salaried employees.

Finally, tier 3 issues are concerned with facts only. One example is if particular employees did, in fact, work the role they were employed for.

 In his decision, Justice Perram wrote:

The issues in all four proceedings substantially overlap in relation to tiers 1 and 2. This suggests that they should be heard together in some fashion in relation to those issues. 

I do not think enough is presently known to determine just how they should be heard. This will not become clear for some time.

Woolworths share price snapshot

This year has been rough so far for the Woolworths share price, but its performance is still besting the broader market.

It has slumped 0.9% year to date. Though, it has gained around 10% since this time last year.

For comparison, the ASX 200 has slipped 1.5% in 2022 and has risen 7% over the last 12 months.

Motley Fool contributor Brooke Cooper 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 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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