The supermarket giant Woolworths is to be investigated by the Fair Work Ombudsman in what is believed to be Australia’s biggest wage underpayment case after admitting it owes staff as much as $300m.
Woolworths on Wednesday told the stock exchange it had so far identified 5,700 current staff it had underpaid for as much as nine years.
But the number of underpaid workers is set to increase as Woolworths sifts through payment records, because the company is yet to determine how many former staff have also been shortchanged.
The Fair Work Ombudsman, Sandra Parker, said she was “shocked” to see Woolworths join a list of large companies guilty of underpayment that already included Wesfarmers, Qantas, Commonwealth Bank, Super Retail Group and Michael Hill Jewellers.
“The Fair Work Ombudsman will conduct an investigation in relation to Woolworths’ self-disclosure and hold them to account for breaching workplace laws,” she said.
Woolworths’ confession also sparked calls from Labor’s employment spokesman, Tony Bourke, for a wide-ranging parliamentary inquiry into wage theft.
He said Labor would try to set one up when the Senate sits again next month.
Giri Sivaraman, a principal employment lawyer at Maurice Blackburn, which has had its own underpayment problems, said Woolworths’ underpayment was “the biggest I’ve ever seen”.
He said it was far more than the previous record, set by a group of underpaid 7-Eleven workers who eventually clawed $160m back from the convenience store chain.
“That was the highest ever underpayment I’ve seen and this is double,” he said. “There’s no universe in which $300m isn’t significant.”
Woolworths said on Wednesday it had only analysed two years of data but that the issue could date back to 2010, which it expects will result in a one-off remediation charge of between $200m and $300m in February’s first-half results.
A Woolworths spokeswoman said the company reported itself to the FWO in August.
But it is believed that, although Woolworths flagged it had compliance problems with the FWO about two months ago, it did not inform the regulator of the vast scale of the underpayment until it made its announcement to the ASX.
The company discovered the underpayments in a review triggered by staff complaints after workers checked their pay packets following the introduction of a new enterprise bargaining agreement at the start of the year.
It said the review would now be extended to all its Australian businesses, which include Big W department stores and Dan Murphy’s liquor stores.
“As a business we pride ourselves on putting our team first, and in this case we have let them down,” said the group chief executive, Brad Banducci. “We unreservedly apologise.”
The company said interim back payments covering the data analysed so far, which would include interest, would be made before Christmas.
While the review was triggered by the new EBA, the workers affected are staff who manage supermarket departments, such as the deli or fruit and vegetables, who are not covered by the agreement.
Instead, they are paid an annual salary that is supposed to buy out their entitlements to overtime or other penalty payments.
However, they are still entitled to the minimum pay set down in the industry award.
The review, conducted by big four accounting firm PwC, discovered that the department managers had been underpaid because they worked shifts that, under the award, entitled them to more money than they received in their annual salaries.
Sivaraman said the “monster” scale of the underpayment, in both time and dollars, raised questions about Woolworths’ management of staff pay.
“I think more questions have to be asked about how this happened because we are talking about a large, well-resourced company,” he said. “It does show that this concept of contracting out of an award through an annual salary doesn’t work.”
Parker said she was frustrated at the number of large corporations confessing to wage underpayment and would take it up with company boards.
“Some of these matters go back many years and several comprise millions of dollars owed to workers,” she said. “This is simply not good enough.”
Corporate Australia exhibited poor governance and complacency and carelessness towards employee entitlements, she said.
And she signalled a tougher approach from a regulator that has been criticised for its unwillingness to take legal action.
“We encourage corporates to cooperate with us to rectify breaches, but they must understand that admission is not absolution,” she said. “Companies should expect that breaking workplace laws will end in a public court enforcement outcome.”
The national secretary of the Shop, Distributive and Allied Employees’ Association, Gerard Dwyer, said the “enormous” underpayment showed unions needed to be returned the power to inspect payroll records.
“We had a concern for some time about how the industrial world operates for the salaried employees,” he said.
“How many hours are they actually working a week? What is reasonable overtime in the minds of these companies?”
The announcement overshadowed the release of Woolworths’ first-quarter sales growth that, driven by the success of its Lion King Ooshies and Discovery Garden checkout giveaways, comfortably beat that announced on Tuesday by its fierce rival Coles.
Comparable sales at Woolworths supermarkets rose 6.6% on the same period a year ago, easily trumping the 0.1% at Coles.
