In the first day of a seven-week trial before Federal Court Justice Nye Perram, FWO’s counsel, Justin Bourke KC, fought the supermarket giants’ argument that they could make up for the obligation to pay overtime by paying managers annual salaries greater than the minimum required under the retail award.

Bourke said it was “entirely foreign” to the award scheme for Coles and Woolworths to make up for overtime by factoring in an employee’s entire salary over a 12-month period. Instead, the supermarket giants had to make up the additional pay during the relevant pay period, which was a maximum of one month. 

“If Coles and Woolworths’ argument is upheld about the distribution of payment, you’re simply profoundly changing the way the award is meant to work and you’re driving a truck through the Fair Work Act,” Bourke said. 

Bourke said the 32 sample employees at Woolworths worked an average of 1.29 hours of overtime on each shift. One delicatessen team manager at the Town Hall store in central Sydney worked an average of four hours’ overtime per day and had an average shift of 13 hours, Bourke said. 

He said that the 42 Coles employees sampled worked an average of 1.84 hours more than an ordinary nine hour shift, with a dairy and dry goods manager working an average of 4.43 hours beyond the standard nine hour shift. 

Bourke criticised the defences by Coles and Woolworths, which did not admit to the underpayments and effectively claimed nobody worked overtime. 

“We say their defences fly in the face of what has occurred publicly…both have admitted underpayments and paid remediation,” he said. 

Woolworths has paid $333 million in remediation to date while Coles has paid $7 million and promised another $25 million late last week, Bourke said.

Justice Perram is hearing two cases by the FWO against Coles and Woolworths and two underpayments class actions against the same supermarket giants alleging that shift workers were not remunerated for work performed outside their ordinary rostered hours and the companies are liable to back pay staff for the unpaid overtime.

Adero Law filed the class action against Coles in May 2020 after the company revealed it owed staff in its supermarket and liquor businesses at least $20 million in pay. The FWO filed its proceedings against Coles in December 2021.

Adero reached a settlement in the class action against Woolworths, but Justice Bernard Murphy rejected the agreement, finding that it would have earned the firm $1.75 million in fees but provided nothing to 27,000 Woolworths employees.

The FWO launched its action ahainst Woolworths in June 2021, making claims on behalf of to about 19,000 of the 27,633 group members in the class action.

The class actions are largely adopting the submissions of the FWO in the trial. 

Coles and Woolworths can’t ‘hide behind’ poor time records, court told

Bourke alleged that Coles and Woolworths kept “no meaningful proper records” of overtime or time off in lieu – instead they paid an annual salary and “hoped that would be enough”, with no check put in place. 

“That structure of annualised salary, you won’t find it anywhere in the award. It is simply not contemplated…it was always a structure that was going to end badly,” he said. 

“In truth, it was like trying to put a square peg in a round hole. It was not what the award contemplated.”

Under the Fair Work Act, the employer has the burden to prove there was no unpaid overtime if its record keeping was poor, said Bourke. 

“Coles and Woolworths can’t hide behind the fact they had very limited ad hoc records tracking time off in lieu…they are trying to take advantage of that,” Bourke said. 

“An employer is required to keep a record…if it fails, the employer has the burden of disproving the [FWO’s] allegation. Under the regulations, we say we prove our claim unless it can be disproved by Woolworths or Coles that we got it wrong.”

While Coles and Woolworths kept records of when employees clocked in and out, that was “not good enough” as it did not say when they were entitled to overtime, said Bourke. 

Coles had a “bigger problem” in that it only kept clocking records for 62 per cent of its employees during the relevant periods, Bourke said.  

Fight over whether managers needed ‘authorisation’ or ‘direction’ to work overtime

While Woolworths and Coles claim that employees can only incur overtime if there was a requirement to work, the FWO argued all it had to do was show the work was done beyond ordinary hours. 

Bourke said that under the award there was no requirement for an authorisation or direction to work overtime. Instead, the award set out that overtime and time off in lieu should be built into the timekeeping system and be triggered once an employee worked beyond their ordinary hours. 

He argued that most of the salaried employees were managers and organised the roster for other employees, meaning it made no sense that Coles and Woolworths had to give permission for them to work overtime. 

“Why do they need someone to tap them on the shoulder and say we give the authorisation [or] direction?” Bourke said. 

“They knew people were working over and above rostered hours pretty much day in, day out. They knew about it higher up. You won’t find any meaningful evidence saying [employees] were not allowed to do that [they] need a direction.”

Bourke argued that Woolworths employment contracts gave a clear authority to work “all hours” because of the nature of the retail industry and there was no basis for the supermarket giant to say it did not have to pay managers beyond 45 hours worked per week.

Similarly, typical Coles contracts said employees were “expected to work” reasonable additional hours to meet the role requirements, which made it clear there was no need for a direction to work overtime, Bourke said. 

Woolworths CFO said potential underpayments ‘an obvious question’, court told

Woolworths’ former chief financial officer David Marr sent an email in October 2019 concerning a media article about managers being underpaid at SuperCheap Auto as they were setting their own rosters, Bourke said.

Maher allegedly said it raised “an obvious question for Woolworths” as managers were also required to set their own rosters, asking how to set up a procedure to ensure it was “not similarly vulnerable”. 

Bourke also pointed to emails in April 2019 between Finlay Consulting and Hayley Baxendale, who was head of workplace relations at Woolworths, over an underpayments complaint by an employee. 

Baxendale allegedly said in the email that the employee was being paid a salary that was greater than the minimum under the award and was therefore expected to “use discretion and judgment” as to when he might need to work overtime. 

“That is 180 degree contrary to Woolworths’ case. It is all about [the fact] they have discretion. They don’t need specification authorisation,” Bourke said. 

Employees ‘rarely, if ever’ told to work longer hours, court told

Dr Ruth Higgins SC for Woolworths argued that employees were “rarely, if ever” told to work longer hours. Instead they worked additional hours “of their own volition”, to mark themselves out for promotion or ensure their stores were running effectively. 

“The FWO says Woolworths was obliged to pay all those hours irrespective of whether Woolworths authorised it or whether the employee elected to stay at work,” Higgins said. 

“We will contend Woolworths did not require or authorise salaried employees to work more than 45 hours per week.”

“We rely on…the higher rates of pay for the salaried employees than those requirements under the award,” said Higgins.

Higgins argued that the total annual salary received by an employee should be considered in asking whether they suffered loss, along with payments received in remediation. 

While Higgins acknowledged Woolworths bore the onus of disproving the FWO’s claim where there were no overtime records, she said it was “of absolutely no moment in this case” because the sample employees’ hours had been agreed between the supermarket giant and regulator. 

“Each of these questions of onus raises a nice and difficult question of law…none of our contentions seek to drive a truck through the Fair Work Act. We are at most astride an electric bicycle,” she said. 

Rachel Doyle SC for Coles said the FWO’s argument was “inapt, inflexible” and did not take into account the working relationship with salaried managers who had autonomy to change their own roster. 

The FWO’s application of the retail award ignored the “industrial reality” of the Coles’ workplace,” said Doyle. 

“It is over-engineered, it is artificial and it is unrealistic,” she said. 

The trial continues on Tuesday.

The FWO is represented by Justin Bourke KC, Tom Smyth, Chris McDermott and Anesti Petridis in the Woolworths matter. The FWO is represented by Justin Bourke SC, Tim Goodwin and Natalie Campbell in the Coles matter. The FWO instructed by Clayton Utz. 

The applicants in the class actions against Woolworths and Coles are represented by Patrick McCabe, instructed by Adero Law. Coles is represented by Rachel Doyle SC, Marc Felman KC, Jonathan Kirkwood SC, Anna Batrouney and James Page, instructed by Herbert Smith Freehills. Woolworths is represented by Dr Ruth Higgins SC, Yaseen Shariff SC, Michael Seck, Vanja Bulut and Robert Pietriche, instructed by Ashurst. 

The class action is Maria Pabalan v Coles Supermarkets Australia Pty Ltd. The regulatory action is Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd.

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