Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd

This was a combined hearing of four major employment proceedings in the Federal Court. Two were brought by the Fair Work Ombudsman against Woolworths and Coles. Two were representative proceedings brought on behalf of employees against the same employers. All four matters concerned alleged underpayments to salaried retail employees by reference to the General Retail Industry Award 2010.

The Court identified a common commercial problem across the cases. The employees were engaged under contracts that provided for annual salaries, but the employers did not keep track of the award entitlements those employees accrued. According to the Court, that meant that in many cases the employees were not paid entitlements they properly had under the Award. The dispute did not end when remediation payments were made.

The extract records that Woolworths had paid over $300 million in remediation and Coles over $7 million, yet the regulator and the employee applicants still argued that more was owing.

That makes this case especially relevant for businesses. It shows how a salary model can become the centre of very large litigation if the employer cannot demonstrate, pay period by pay period, that the salary actually covered the minimum award entitlements that arose in practice.

The scale of the litigation was significant and should be understood early. In the Woolworths regulator proceeding, the Fair Work Ombudsman alleged underpayments affecting about 19,000 employees between 17 June 2015 and 30 September 2019. These were store-based management employees, including store managers and department managers. In the Coles regulator proceeding, the allegation concerned 8,767 employees across 1 January 2017 to 31 March 2020, again involving management roles within stores.

The Court accepted that these cases could not sensibly be tried employee by employee. To deal with that, the Woolworths matter proceeded using 32 selected employees called the Calculation Employees. The Coles matter proceeded using 42 Sample Salaried Employees. The class actions also operated on a representative basis. The Court explained that the point of using sample employees was to allow common legal questions to be determined by reference to actual facts rather than abstract theory.

That procedural structure matters for business readers because it shows how large payroll disputes are often run. Courts may use representative employees to test common issues, but they still expect those issues to be grounded in real work patterns, real shifts and real award triggers. A business cannot assume that broad legal propositions will answer every payroll question across a workforce.

The judgment covered a wide range of issues. The Court said its reasons were structured to deal with set-off and contractual construction, record-keeping under the Fair Work Act and the construction of s 557C, agreements between employees and employers under the Award, various award entitlements including overtime, part-time employee issues, employee-specific factual issues, calculation and allocation issues, compensation, and a limitations issue in the Pabalan proceeding.

For most businesses, the most important issue in the extract is set-off. The question was whether contractual clauses could allow annual salary payments to absorb award liabilities over a longer period, such as 26 weeks, or whether any set-off only worked within the particular pay period in which the entitlement arose. The Woolworths issues expressly contrasted those two possibilities.

The Coles issues similarly asked whether annual salary could absorb award entitlements, over what period set-off could apply, and how payments should be allocated to particular award entitlements.

The extract also shows that the Court was concerned with how the parties framed their disputes. It said many construction issues had been posed in a context divorced from facts. Instead of starting with actual employee disputes and identifying the legal questions they raised, the parties often did the reverse. The Court regarded that as a serious problem because some supposed mixed questions of law and fact were really requests for answers to hypothetical scenarios.

The clearest substantive conclusion supported by the extract appears in the Court’s summary of the set-off issues. The Court said: “In summary my conclusions are that the clauses are only effective to discharge obligations under the Award within a single pay period.” That is the key outcome businesses should focus on from the material presently available.

The extract then explains part of the reasoning in the Woolworths context. Woolworths paid salaried employees annual remuneration made up of base salary, car allowance where applicable and superannuation. But under the Award, employees had to be paid weekly or fortnightly, and Woolworths used fortnightly payments. The Court said the annual remuneration figure was not itself associated with a direct payment obligation.

Instead, the actual payment rights and obligations were derived by dividing the annual figure by 26. On that approach, the payable obligation was the fortnightly amount, not a free-standing annual payment obligation.

That distinction was conceptually significant because the contract clause sought to satisfy minimum entitlements by reference to remuneration over a 26-week period. On the extract, the Court did not accept that approach in the way the employer contended. In practical terms, the Court’s summary conclusion means that an employer could not rely on excess salary in one pay period to wash out a shortfall arising in another pay period under the relevant clauses.

The Court also declined to determine a number of issues. It said some issues were misconceived because they sought advisory opinions about hypothetical factual scenarios untethered from actual employees. It generally did not resolve the Tier 3 issues and also declined to resolve some issues labelled as Tier 2 where they were really legal questions on assumed facts. All four proceedings were listed for case management on 27 October 2025, showing that the judgment did not finally dispose of every remaining issue.

One of the most useful parts of the extract for business readers is the Court’s criticism of hypothetical issue framing. The Court said the whole point of using sample employees was to determine common questions by reference to actual facts. Yet many issues were still presented at a high level of generality, with facts treated as an afterthought or forgotten altogether.

The Court gave a concrete example involving a clause about rest periods between shifts. It explained that whether work done without a direction from the employer engaged the clause could be context dependent. The answer might differ between an employee who deliberately stayed back and an employee who stayed back because unrealistic work demands left them overwhelmed. By not tying the question to an actual employee and actual circumstances, the issue became misconceived.

This matters in practice. Businesses sometimes approach payroll compliance by asking broad questions such as whether salary can cover overtime, whether unauthorised extra work counts, or whether a manager’s package is high enough overall. The Court’s approach suggests those questions may not be answerable in the abstract.

The legal answer may depend on what happened on a particular shift, what the roster said, what the employee was required or permitted to do, and what the contract and Award required in that pay period.

For employers, that means compliance work should start with documents and conduct. Look at the contract, the roster, the time records, the actual hours worked, the approval process, and the award trigger said to arise. If you are investigating a possible underpayment, build the analysis around real examples rather than broad assumptions. If you are drafting contracts, make sure the drafting matches the way work is actually performed and paid.

Businesses should not read this case as saying salary arrangements are impossible. The stronger point is that salary arrangements for award-covered employees must be built and administered carefully. First, identify whether the employee is covered by an award at all. Second, identify which award entitlements can arise in the role, such as overtime, penalty rates, allowances, rest break rules, roster-related entitlements, public holiday entitlements or annual leave loading.

Third, make sure the contract clearly states how the salary is intended to satisfy those entitlements and that the drafting matches the actual pay cycle used in payroll.

The extract also points to a record-keeping problem. If the employer does not track the entitlements that accrue under the Award, later disputes become expensive and difficult. Even large remediation programs may not end the matter if there is still disagreement about what the Award required, how salary payments should be allocated, and whether the contract validly allowed set-off in the way the employer says.

For many businesses, the practical response is regular reconciliation. Compare what the employee received in each pay period against what the Award required for the work actually performed in that period. If the role regularly involves variable hours, weekends, public holidays or extra time outside rostered hours, that reconciliation becomes more important, not less.

The Court’s approach in this case suggests that trying to smooth everything out over a long period may not work if the contract and payment structure do not support it.

Businesses should also note that this judgment did not finally resolve every issue. The proceedings were listed for further case management, and the extract does not provide the complete picture on final orders or all unresolved questions. Anyone making a high-stakes compliance decision should review the full judgment and any later orders.

The judgment was delivered on 5 September 2025 by Perram J in the Federal Court of Australia. The hearing dates recorded in the extract ran across June and July 2023, with last submissions on 16 May 2025. The Court ordered that each proceeding be listed for case management on 27 October 2025 at 9.30 am.

That procedural position is important. It means the judgment should be read as a substantial reasons decision on many issues, but not necessarily as the final endpoint of the litigation. The extract itself shows that some issues were not determined because they were too hypothetical or insufficiently tied to actual facts. The full judgment and any later orders should be checked before relying on it for a final statement of compensation, relief or all remaining issues.