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
[2025] FCA 1092
•5 September 2025
FEDERAL COURT OF AUSTRALIA
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 [2025] FCA 1092
File numbers: NSD 581 of 2021
NSD 1252 of 2021
NSD 2004 of 2019
NSD 542 of 2020Judgment of: PERRAM J Date of judgment: 5 September 2025 Catchwords: INDUSTRIAL LAW – where regulatory proceedings brought by the Fair Work Ombudsman and class actions brought against the same employers are heard together – where employers are alleged to have underpaid entitlements owed to employees under the General Retail Industry Award 2010 – where compensation is sought under s 545 of the Fair Work Act 2009 (Cth) – where relevant employees employed pursuant to a contract providing for payment of an annual salary – where the employer has not otherwise kept track of the entitlements under the award in respect of the relevant employees – construction of the Fair Work Act 2009 (Cth) – construction of the General Retail Industry Award 2010 – contractual interpretation Legislation: Fair Work Act 2009 (Cth)
Federal Court of Australia Act 1976 (Cth)
Fair Work Regulations 2009 (Cth)
Cases cited: 4 Yearly Review of Modern Awards – Plain language re-drafting – General Industry Retail Award 2010 [2018] FWC 6075
Application by Penelope Vickers to terminate the Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited Retail Agreement 2011 [2016] FWC 6350
Application by the Australian Retailers Association; Variation on the Commission's own motion – General Retail Industry Award 2020 [2024] FWCFB 197
Application by Wilson Parking 1982 Pty Ltd & Others [2004] AIRC 1052
Application for approval of the Fantastic Furniture Enterprise Agreement 2019 [2020] FWCA 699
Australasian Meat Industry Employees Union v Dick Stone Pty Ltd [2022] FCA 512; 314 IR 441
Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; 111 IR 227
Avel Pty Ltd v Multicoin Amusements Pty Ltd [1990] HCA 58; 171 CLR 88
Baker v Woolworths Group Limited (No 2) [2022] FCA 534
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
City of Wanneroov Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; 153 IR 426
CMA Corp Ltd v SNL Group Pty Ltd [2012] NSWCA 138
Coote v Mainline Access Pty Ltd (No 3) [2019] FCCA 383; 344 FLR 1
Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400
Fair Work Ombudsman v Woolworths Group Ltd (Calculation Employees) [2022] FCA 203
Fair Work Ombudsman v Woolworths Group Ltd (Case Management) [2022] FCA 376
Foster v Faulkhead [2005] SAIRC 86
Gallagher v AAG Labour Services Pty Ltd [2020] FCA 1753
Ghimire v Karriview Management Pty Ltd (No 2) [2019] FCA 1627; 290 IR 331
In re Butter, Cheese and Bacon Factories and Milk and Cream Condenseries (Newcastle and Northern) Award [1962] AR (NSW) 1
In the matter of applications by organisations of employees for awards and variations of certain awards with respect to rates of pay for work performed on Saturdays and Sundays (1947) 58 CAR 610
James Turner Roofing Pty Ltd v Peters [2003] WASCA 28; 132 IR 122
Kucks v CSR Ltd (1996) 66 IR 182
Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99; 240 FCR 578
Lynch v Buckley Sawmills Pty Ltd [1984] FCA 348; 3 FCR 503
Michael Hill Jeweller (Australia) Pty Ltd T/A Michael Hill [2022] FWCA 4256
Polan v Goulbourn Valley Health (No 2) [2017] FCA 30
Poletti v Ecob (No 2) (1989) 31 IR 321
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Racing and Wagering Australia re State Government Agencies Administration Award 2010 [2011] FWA 5985
Ray v Radano [1967] AR (NSW) 471
Re Annualised Wage Arrangements [2018] FWCFB 154; 274 IR 29
Re Application by the Australian Retailers Association [2024] FWCFB 251
Re Brickmakers and Assistants (State) Award [1948] AR (NSW) 234
Re Fantastic Furniture Pty Ltd [2020] FWC 559
Re General Retail Award 2010 [2010] FWAFB 305; 192 IR 9
Re Hospital Employees’ (Metropolitan) Award & Ors [1969] AR (NSW) 120
Retail and Fast Food Workers Union Inc v Woolworths Group Ltd; Woolworths (South Australia) Pty Ltd v SDA; Shop, Distributive and Allied Employees Association; Australian Workers’ Union; Australasian Meat Industry Employees Union [2019] FWCFB 2355; 289 IR 214
Scott v Sun Alliance [1993] HCA 46; 178 CLR 1
Shift Workers’ Case [1972] AR (NSW) 633; 14 AILR 700
Shop, Distributive and Allied Employees Association v Fantastic Furniture Pty Ltd(t/a Fantastic Furniture) [2020] FWCFB 3570
Target Australia Pty Ltd v Shop, Distributive and Allied Employees’ Association [2023] FCAFC 66; 324 IR 304
Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406; 121 IR 250
TransAdelaide v Leddy (No 2) (1998) 71 SASR 413
United Voice v Wilson Security Pty Ltd [2019] FCAFC 66; 269 FCR 608
Vines v Djordjevitch [1955] HCA 19; 91 CLR 512
Wardman v Macquarie Bank Ltd [2023] FCAFC 13; 322 IR 278
Waters v Mercedes Holdings Pty Ltd [2012] FCAFC 80; 203 FCR 218
WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179
Division: Fair Work Division Registry: New South Wales National Practice Area: Employment and Industrial Relations Number of paragraphs: 863 Date of last submissions: 16 May 2025 Date of hearing: 5-8, 13-15, 20-21, 23, 27-30 June 2023, and 14, 17-20 July 2023 Counsel for the Applicant in NSD 581 of 2021: J Bourke KC with T Smyth, C McDermott and A Petridis Solicitors for the Applicant in NSD 581 of 2021: Clayton Utz Counsel for the Respondents in NSD 581 of 2021: R Higgins SC and Y Shariff SC with M Seck, V Bulut and R Pietriche Solicitors for the Respondents in NSD 581 of 2021: Ashurst Australia Counsel for the Applicant in NSD 1252 of 2021: J Bourke KC with T Goodwin and N Campbell Solicitors for the Applicant in NSD 1252 of 2021: Australian Government Solicitor Counsel for the Respondent in NSD 1252 of 2021: R Doyle SC, M Felman KC and J Kirkwood SC with B Avallone, A Batrouney and J Page Solicitors for the Respondent in NSD 1252 of 2021: Herbert Smith Freehills Kramer Counsel for the Applicant in NSD 2004 of 2019: P McCabe Solicitors for the Applicant in NSD 2004 of 2019: Adero Law Counsel for the Respondents in NSD 2004 of 2019: R Higgins SC and Y Shariff SC with M Seck, V Bulut and R Pietriche Solicitors for the Respondents in NSD 2004 of 2019: Ashurst Australia Counsel for the Applicant in NSD 542 of 2020: P McCabe Solicitors for the Applicant in NSD 542 of 2020: Adero Law Counsel for the Respondent in NSD 542 of 2020: R Doyle SC, M Felman KC and J Kirkwood SC with B Avallone, A Batrouney and J Page Solicitors for the Respondent in NSD 542 of 2020: Herbert Smith Freehills Kramer ORDERS
NSD 581 of 2021
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: WOOLWORTHS GROUP LIMITED (ACN 000 014 675)
First Respondent
WOOLWORTHS (SOUTH AUSTRALIA) PTY LIMITED (ACN 007 873 118)
Second Respondent
ORDER MADE BY:
PERRAM J
DATE OF ORDER:
5 SEPTEMBER 2025
THE COURT ORDERS THAT:
1.The proceeding be listed for case management on Monday, 27 October 2025 at 9.30 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1252 of 2021
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: COLES SUPERMARKETS AUSTRALIA PTY LTD ACN 004 189 708
Respondent
ORDER MADE BY:
PERRAM J
DATE OF ORDER:
5 SEPTEMBER 2025
THE COURT ORDERS THAT:
1.The proceeding be listed for case management on Monday, 27 October 2025 at 9.30 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 2004 of 2019
BETWEEN: CAMERON BAKER
Applicant
AND: WOOLWORTHS GROUP LIMITED ABN 88 000 014 675)
First Respondent
WOOLWORTHS (SOUTH AUSTRALIA) PTY LIMITED ABN 34 007 873 118
Second Respondent
ORDER MADE BY:
PERRAM J
DATE OF ORDER:
5 SEPTEMBER 2025
THE COURT ORDERS THAT:
1.The proceeding be listed for case management on Monday, 27 October 2025 at 9.30 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 542 of 2020
BETWEEN: MARIA PABALAN
Applicant
AND: COLES SUPERMARKETS AUSTRALIA PTY LTD ABN 45 004 189 708
Respondent
ORDER MADE BY:
PERRAM J
DATE OF ORDER:
5 SEPTEMBER 2025
THE COURT ORDERS THAT:
1.The proceeding be listed for case management on Monday, 27 October 2025 at 9.30 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
INTRODUCTION
This judgment concerns four separate actions which were heard in parallel:
(a)Fair Work Ombudsman v Woolworths Group Limited (ACN 000 014 675) & Anor, NSD 581 of 2021 (‘FWO v Woolworths’);
(b)Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd ACN 004 189 708, NSD 1252 of 2021 (‘FWO v Coles’);
(c)Baker & Anor v Woolworths Limited ABN 88 000 014 675 & Anor, NSD 2004 of 2019 (‘Baker’); and
(d)Pabalan v Coles Supermarkets Australia Pty Ltd ABN 45 004 189 708, NSD 542 of 2020 (‘Pabalan’).
Each concerns the alleged underpayment by Woolworths Group Limited bodies (collectively, ‘Woolworths’) and Coles Supermarkets Australia Pty Ltd (‘Coles’) of certain employees by reference to the General Retail Industry Award 2010 (the ‘Award’). In the actions brought by the Fair Work Ombudsman (the ‘FWO’), which I will refer to from time to time as the ‘regulatory proceedings’, the relief sought includes a claim for compensation on behalf of individual employees under s 545 of the Fair Work Act 2009 (Cth) (the ‘FW Act’). The Baker and Pabalan proceedings are class actions in which similar allegations are made against Woolworths and Coles albeit over a longer period of time.
The basic problem common to each action is that the employees in question were employed under written contracts providing for an annual salary. Woolworths and Coles did not keep track of the entitlements of these employees under the Award and hence, in many cases, did not pay entitlements which the employees properly had. Both Woolworths and Coles have made remediation payments (which in Woolworths’ case have totalled over $300 million and in Coles’ case over $7 million). Nevertheless, the FWO in the regulatory proceedings and the applicants in the class actions consider that more is due. Largely, this is because the parties disagree on the meaning of various clauses in the Award, the relevant contracts of employment and the FW Act.
Background
Before turning to the issues, it is convenient to outline some salient background matters in each proceeding.
In FWO v Woolworths, the FWO alleges that Woolworths underpaid about 19,000 employees whose employment was governed by the Award between 17 June 2015 to 30 September 2019. The employees in question are in store-based management positions. The most senior of these employees are store managers and the bulk consist of persons who were in charge of particular departments such as the dairy section.
The parties agreed that the case could not sensibly proceed in relation to all 19,000 employees. They sought to overcome this problem by selecting particular employees who were to serve as examples of the disputes between them and obtaining a ruling in the case of each. Initially, the FWO made specific allegations about 70 employees across the period from 5 March 2018 to 3 March 2019 (the ‘Calculation Period’). Ultimately, both parties thought this was too many but they disagreed about what an appropriate number would be. Woolworths wished to proceed on the basis of a sample of 10 employees but the FWO contended for 32. On 9 March 2022 I determined that the trial would proceed on the basis of 32 employees (the ‘Calculation Employees’): Fair Work Ombudsman v Woolworths Group Ltd (Calculation Employees) [2022] FCA 203. When the outcome of the trial is known the parties will apply the conclusions reached to the remaining employees.
Woolworths operates 1,076 stores in Australia. During the relevant period the 32 Calculation Employees were employed at five of these stores. These were the Town Hall store in Sydney’s central business district (Woolworths’ largest store in 2018), the Wheelers Hill and Camberwell stores in Melbourne, the Newstead store in Brisbane and the Macarthur Chambers store in Brisbane’s central business district. I shall refer to these as the Town Hall, Wheelers Hill, Camberwell, Newstead and Macarthur stores. Of the 32 Calculation Employees nine were called to give evidence. Seven were called by the FWO and two by Woolworths.
In FWO v Coles, the FWO alleges that Coles underpaid 8,767 employees across the period 1 January 2017 to 31 March 2020 (the ‘Assessment Period’). The employees are in management positions within individual stores and include store managers and the heads of individual departments within stores such as the butchery section.
I made orders on 25 July 2022 confining the FWO’s case against Coles to a representative sample of 42 employees (the ‘Sample Salaried Employees’). Unlike Woolworths, each of the Sample Salaried Employees did not necessarily work at a single store. Of the 42 employees, 15 were called to give evidence: nine by the FWO and six by Coles.
The background to Baker is summarised in Baker v Woolworths Group Limited (No 2) [2022] FCA 534 at [9]-[15] per Murphy J. In essence, the proceeding is a class action commenced by the applicants (Messrs Baker and Piro) under Pt IVA of the Federal Court of Australia Act 1976 (Cth) on their own behalf and on behalf of salaried Woolworths employees who worked at some time between 29 November 2013 and 29 November 2019.
In Pabalan, Ms Pabalan brings a representative proceeding on behalf of several thousand Coles managers.
Issues in dispute
Creation of issue tiers
On 8 April 2022 I determined in Fair Work Ombudsman v Woolworths Group Ltd (Case Management) [2022] FCA 376 that the issues in each action should be divided into three categories:
(a)discrete questions of law about the interpretation of the Award, the FW Act and the contracts of employment (‘Tier 1 Issues’);
(b)questions of mixed law and fact (‘Tier 2 Issues’); and
(c)questions of fact only (‘Tier 3 Issues’).
There is significant commonality of issues between the proceedings. For this reason I have chosen to deal with the proceedings in one judgment. There are also, however, a number of differences, not only in the framing and organisation of issues but also in whether they were presented at all in a particular proceeding.
Scope of initial trial
One of the difficulties with this litigation is the manner in which a majority of the construction issues were posed by the parties in a context divorced from any facts. The point of the 32 Calculation Employees in FWO v Woolworths and the 42 Sample Salaried Employees in FWO v Coles was to permit these common questions to be determined by reference to actual facts. Although in some instances the parties did occasionally refer to these persons this was not a uniform practice. Further, it was clear that rather than starting with the facts of actual disputes and then proceeding to ascertain what the legal debates were the parties essentially approached the problem the other way around. Construction disputes were identified at a high level of generality, facts were an afterthought or, more often, forgotten.
This has two consequences. The first is that the parties have not identified factual disputes for each legal dispute which was the whole point of the process. Before progressing these proceedings any further this problem will need to be addressed. For each legal issue the parties are going to need to identify an employee whose work gives rise to the legal issue suggested. I do not see that there should be any difficulty in identifying these persons. The number of such persons should be kept to an absolute minimum. If a single employee can be used to resolve more than one legal issue then that course should be adopted. There is no need for the whole of the facts concerning that employee to be set out. A single instance (i.e. one shift) will suffice to make the legal issues not hypothetical.
The second consequence is the apparent pointlessness of the Tier 3 issues. These were said to relate to factual matters only. From the parties’ submissions it is difficult to understand what the Court was being asked to do in relation to these. At various junctures it has been necessary to resolve some of these issues (for example in relation to opening times of stores) but largely the parties did not seem to know what they intended by the trial of these Tier 3 issues or what practical purpose they served in helping the parties to resolve the wider issues that the regulatory proceedings present. It may be that the resolution of many of the Tier 1 and 2 issues will make them irrelevant. It may be that they were always irrelevant. In any event, I do not generally resolve the Tier 3 issues.
There are also some issues that although labelled as Tier 2 I also decline to resolve. By way of example, Issues 6(b)-(j) are all related in various ways to the application of cl 31.2(c). The parties have styled each issue as a Tier 2 Issue. In FWO v Woolworths (Case Management) [2022] FCA 376 at [4(b)] Tier 2 Issues were described as questions of law mixed with questions of fact. In their recitation of Issues 6(b)-(j) the parties posed a series of questions of law premised on certain factual circumstances but such questions are not mixed questions of fact and law; rather, they are questions of law on an assumed set of facts. For example, Issue 6(b) was as follows:
Where an employee has worked outside their rostered hours without the authorisation of, or having been required by, the employer to work such hours, are such additional hours included for the purposes of determining whether the employee has had a 12 hour rest period, or any agreed shorter rest period under clause 31.2(c) of the Retail Award, between the completion of work on one day and the commencement of work on the next day?
However, this issue was not related to any particular employee about whom such a finding was sought. As such Issues, 6(b) to (j) are misconceived and seek what are in effect advisory opinions about hypothetical factual scenarios untethered from facts. Although styled as Tier 2 mixed questions of law and fact, what the parties have actually posed in Issues 6(b) to 6(j) are questions of law on assumed facts. This observation is not just pedantry. In some cases, Issues 6(b) to (j) assume contestable factual material whose real world subtleties bear directly on the answer to the questions posed. Issue 6(b) illustrates the problem. Whether work done by an employee without a direction from an employer engages cl 31.2(c) is likely to be context dependent. There is, for example, a difference between the manager of the shelf stacking team who, being completely up to date with his allocated work, deliberately works back late to engage cl 31.2(c) and, on the other hand, the manager of the dairy counter who, completely snowed under by unrealistic work demands made by Woolworths, tries to keep her head above water by staying back late. By not tying the cl 31.2(c) question to any actual facts, Issue 6(b) is misconceived. The same may be said, perhaps more strongly, of Issue 6(c) which sought to survey the consequences of such consent-sapping circumstances on cl 31.2(c) but in a way untethered to any employee actually in those circumstances.
In light of these challenges, I will hold a case management hearing at 9.30 am on Monday, 27 October 2025. At that time, these issues can be discussed.
FWO v Woolworths
In FWO v Woolworths, the parties in this action were able to agree a table of 53 issues to be determined.
Given the concerns I have raised above about the insufficient linking of legal issues with factual disputes, I have not proposed to address the following issues in this judgment: 6(b)-(j), 7, 8, 9, 10, 11, 16, 17(b)-(d), 23, 24, 25, 27(b), 30, 31(b), 32(b), 34, 35, 36, 41, 45, 48, 49, 50, 51(b) and (d), and 52.
FWO v Coles
In FWO v Coles, the parties agreed there were 76 issues to be determined. In fact, there were 75 due to the existence of issues 19A and 73A, the non-existence of issue 28, and the removal of issues 70 and 74.
Again, given the concerns raised in the previous section, I have not proposed to address the following issues in this judgment: 7, 8, 12, 14, 16(a) and (b), 18, 20, 22, 23, 24, 25, 26, 29, 31, 33, 36, 40, 41, 44, 45, 47, 51, 54, 57, 58, 59, 64, 65, 69, 71, 75 and 76.
Baker
On 25 July 2022 and 7 December 2022 I made trial scope orders circumscribing the issues to be determined in Baker. The effect of the orders is that the Tier 1 and 2 issues which are common to group members will be determined in this proceeding. The state of affairs in relation to the Tier 3 issues is that only Mr Baker’s position will be examined and then only in relation to the issues concerning him which have been raised by the FWO in FWO v Woolworths. There are other Tier 3 issues concerning Mr Baker which are raised in the class action which have not yet been tried. None of the issues concerning Mr Piro were tried and his position is not the subject of these reasons.
By a list of issues dated 3 July 2023 the parties explained how the issues in this proceeding related to the issues in FWO v Woolworths. A number of issues were adopted wholesale from that action. That number is said by the applicants to be 32 however on my count it is 33 . On each of these common issues the applicants adopted the position of the FWO with one exception, being issue 42(b) in the FWO v Woolworths list of issues. Woolworths adopted its submissions from FWO v Woolworths on the common issues without reservation.
The list of issues also identified 14 issues which are said to be unique to this proceeding. The applicant submitted that eight of these are not unique in substance.
Pabalan
On 17 February 2023 I made orders which provided that two sets of issues would be determined at trial for the purposes of Pabalan. The first set of issues concerns Coles’ liability to Ms Pabalan and the principles and methodology applicable to the quantification of any compensation owing to her (stopping short however of the actual calculation of any such compensation). The second comprises the Tier 1 and Tier 2 issues common to Ms Pabalan and group members. No Tier 3 issues arise for consideration in this action.
To the extent that the issues in this proceeding and the issues in FWO v Coles overlap they are agreed by the parties to be contained in a document entitled ‘Amended Joint List of Common Questions’. Unlike in Baker the parties here did not adopt in a wholesale fashion issues from FWO v Coles. Rather, the list of common questions identifies all of the questions said to arise for determination and, where applicable, links those questions to analogous issues in FWO v Coles. In respect of those questions in the Pabalan proceeding for which there is an analogue in the FWO v Coles proceeding (being 30 of the total 40 in the list of common questions) the applicant adopted the FWO’s submissions and Coles largely adopted its own submissions. Of the remaining 10 questions the applicant contended that two raise substantively identical issues to issues already canvassed in FWO v Coles.
Structure
In light of the above, this judgment takes the following structure:
(a)Part A deals with set-off and contractual construction;
(b)Part B deals with record-keeping under the FW Act and the construction of s 557C;
(c)Part C deals with agreements between employees and employers under the Award;
(d)Part D deals with various entitlements under the Award including overtime;
(e)Part E deals with issues relating to part-time employees;
(f)Part F deals with certain employee-specific factual issues that arose in respect of Mr Baker, Ms Pabalan and Calculation Employee 11, Ms Brown;
(g)Part G deals with calculation and allocation issues;
(h)Part H deals with compensation; and
(i)Part I deals with a limitations issue that arose in Pabalan.
PART A: SET-OFF
Issues 46 and 47 in FWO v Woolworths and Issues 73 and 73A in FWO v Coles relate to the operation of certain contractual clauses and their purported ability to ‘set off’ the annual salaries against any shortfall generated by entitlements under the Award. Issues 46 and 47 ask:
Issue 46
(a) On the proper construction and operation of the “Minimum Entitlements” clause, does the clause operate to:
(i) permit Woolworths to set off the Annual Salary (and other benefits and allowances) paid to a Salaried Employee in excess of their monetary entitlements under the Retail Award in each pay period during a 26-week period against any shortfall in the amount paid to the Salaried Employee for the Minimum Entitlements that arose under the Retail Award during other pay periods in the same 26-week period; or
(ii) permit Woolworths to set off fortnightly payments to a Salaried Employee paid in excess of their Minimum Entitlements prescribed in the Retail Award only against any shortfall in the amount paid to a Salaried Employee for the Minimum Entitlements that arose under the Retail Award during the particular fortnight?
(b) Is the “Minimum Entitlements” clause contrary to public policy, void and/or otherwise of no effect?
(c) Is the minimum entitlements clause capable of being read down from 26 weeks to 2 weeks in light of s 323 of the FW Act and clause 23.1 of the Retail Award?
Issue 47
When comparing payments made to a Salaried Employee against their Minimum Entitlements under the Retail Award (either on a pay period basis or a 26-week basis), can:
(a) payments of Annual Salary; and/or
(b) payments of benefits and allowances paid in addition to base salary and payment of salary for periods of leave be set off against the following Retail Award entitlements in that period:
(i) the Sunday Penalty Entitlements;
(ii) the Public Holiday Penalty Entitlements;
(iii) the Entitlement to Breaks Between Work Periods;
(iv) the No More than Six Consecutive Days Work Entitlement;
(v) the Six and Four Day Weeks’ Entitlement;
(vi) the Consecutive Days’ Off Entitlement;
(vii) the Maximum Days Per Four Week Cycle Entitlement;
(viii) the Entitlement for Employees Who Regularly Work Sundays;
(ix) the Roster Notification Entitlement;
(x) the Span of Ordinary Hours Entitlement;
(xi) the Meal Allowance Entitlement for each of the First and Second Meal;
(xii) the Annual Leave Entitlement?
Issues 73 in FWO v Coles asks:
In relation to the contract clauses set out in the particulars under paragraph 12 of the Amended Defence:
(a) Should the clauses be construed as contrary to public policy, void and/or otherwise of no effect?
(b) If no to (a):
(i) can payments of annual salary be used to absorb all or any entitlements arising under the Retail Award?
(ii) if so, over what period may set off be applied (such as annual or monthly)?
(c) If yes to (b)(i), how should the payments made to a Salaried Employee be allocated to particular Retail Award entitlements?
The parties were unable to agree on the exact wording of Issue 73A. Coles articulated the issue as follows:
Where a Salaried Employee did not have a written contract of employment, did their implied or inferred contract of employment contain terms which enabled Coles to set off their entitlements arising under the Retail Award?
The FWO instead phrased it as follows:
Where a Sample Salaried Employee did not have a written contract of employment, did their
implied or inferredoral contract of employment contain implied terms which enabled Coles to set off their entitlements arising under the Retail Award?This inability to agree even simple matters mars much of this litigation. It is not necessary to resolve it.
The Baker parties adopted the set off clause issue (Issue 46) from FWO v Woolworths. Woolworths adopted its submissions from that proceeding on this issue and Mr Baker adopted the submissions of the FWO.
Issue 35 in Pabalan is directed to the efficacy of set-off clauses and was expressed to be similar to Issue 73 in FWO v Coles. On this issue Coles adopted its submissions in FWO v Coles. Ms Pabalan accepted in her written submissions that the issue corresponds with Issue 74 in FWO v Coles and adopted the FWO’s submissions in that respect. I will assume this was intended to be a reference not to Issue 74, which was ultimately not pressed by the FWO, but rather to Issue 73.
In summary my conclusions are that the clauses are only effective to discharge obligations under the Award within a single pay period.
A.1 FWO v Woolworths
All of Woolworths’ salaried employees were given annual salaries. These salaries were provided for by a template letter of offer and employment contract (together, ‘the contract’) various versions of which Woolworths tendered. The salaries consisted of a base salary, a car allowance (where applicable) and superannuation. These three annual amounts were collectively referred to in the contract as the ‘Remuneration’. Under the Award, Woolworths was obliged to pay its employees on either a weekly or fortnightly basis: cl 23.1. Under the contract, Woolworths opted for a fortnightly rather than weekly payment cadence. In particular, the contract provided that the base salary was to be paid by fortnightly instalments as was the car allowance. It is unclear how often superannuation was paid but I will assume for present purposes that it was paid fortnightly as well.
Although the contract fixed an annual remuneration this annual fixing was not associated with any direct payment obligation of Woolworths. The actual payment rights and obligations of the parties were derived from the provisions of the contract and the Award requiring payments to be made to the employee on a fortnightly basis. So understood, the contractual stipulation of an annual remuneration was a number from which the actual payment rights and obligations of the parties were derived by dividing that number by 26. As will be seen, this is conceptually significant. In particular, there was no obligation to pay the annual Remuneration but rather only an obligation to pay one twenty-sixth of the annual Remuneration each fortnight.
This fortnightly amount was in excess of the minimum wage due to the employees for working ordinary hours under the Award in each fortnight. The present difficulty arises from the inclusion of a clause in the contract which sought to discharge Woolworths’ obligations to make payments under the Award by reference to the non-payable annual Remuneration rather than by reference to the payable (and paid) fortnightly remuneration. This was clause 6:
6) Minimum entitlements
If at any time you are entitled to any payment or other benefit as a consequence of the Employment (whether under legislation, an industrial instrument, the National Employment Standards or otherwise) including, without limitation, minimum hourly rates, penalties, overtime, allowances such as meal allowances and loadings such as annual leave loading (Minimum Entitlements), you agree that:
(a) as far as possible, the Remuneration and other benefits under this Agreement will be in satisfaction of the Minimum Entitlements over a 26 week period calculated at the applicable minimum rate: and
(b)the Minimum Entitlements do not form part of this Agreement.
As part of this, your Base Salary and any allowance outlined in your Letter of Offer includes payment for:
(a)all hours you work over a 26 week period (whether part of your ordinary working hours or not): and
(b)public holidays and substitute public holidays (whether you work on those days or not).
It is to be noted that the first sub-clause (a) is expressed only to operate ‘as far as possible’.
It is not in dispute that a payment made by an employer may simultaneously discharge both:
(a)an obligation arising under the terms of a contract of employment; and
(b)an obligation accruing under the terms of an industrial instrument such as an award.
The principle is uncontroversial: see Wardman v Macquarie Bank Ltd [2023] FCAFC 13; 322 IR 278 (‘Wardman’) at [10] per Bromberg J and [126]-[130] per Wheelahan J; WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179 (‘Rossato’) at [913]-[921] per White J and [1007]-[1021] per Wheelahan J (not disturbed on appeal). A straightforward example of the principle is afforded in a case where a contract of employment expressly provides that the monthly payment of a contractual salary is also to discharge the employer’s obligation to pay the minimum amount due under an industrial instrument each month (where the salary equals or exceeds that minimum amount). Although the parties exchanged somewhat unfocussed but very extensive submissions about this principle, there was it turns out little disagreement between them about it.
The parties also referred very extensively to the two limitations on this principle which are set out in Poletti v Ecob (No 2) (1989) 31 IR 321 (‘Poletti v Ecob’) at 333 per Keely, Ryan and Gray JJ and summarised in Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99; 240 FCR 578 (‘Linkhill’) at [40]-[67] per North and Bromberg JJ. The first applies where a payment by an employer to an employee is made pursuant to a contractual obligation which the parties have agreed is for a specific purpose extraneous to the payment of award entitlements. The second limitation, which can be termed the ‘designation’ limitation, applies where a payment (whether paid under a contract or not) is designated as being for a purpose other than the satisfaction of award entitlements. Neither is immediately relevant given that in this case there is an express contractual attribution.
That attribution is contained in cl 6 of the contract. Its evident intent, if perhaps not its precise form, is to permit Woolworths to pool its excess Award payments over a six month period and then to deem that pool to be in ‘satisfaction’ of Woolworths’ obligation to make payments under the Award. The Award payments in question are those for minimum hourly rates together with other entitlements such as the payment of penalties, overtime, allowances and loadings.
The FWO submits that cl 6 is not capable of any lawful operation because of s 323(1) of the FW Act:
323 Method and frequency of payment
(1)An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a) in full (except as provided by section 324); and
(b)in money by one, or a combination, of the methods referred to in subsection (2); and
(c) at least monthly.
Also relevant is s 324(1):
324 Permitted deductions
(1)An employer may deduct an amount from an amount payable to an employee in accordance with subsection 323(1) if:
(a)the deduction is authorised in writing by the employee and is principally for the employee’s benefit; or
(b)the deduction is authorised by the employee in accordance with an enterprise agreement; or
(c)the deduction is authorised by or under a modern award or an FWC order; or
(d)the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court.
Section 323(1) refers to payment in full at least monthly. In this case, the parties have agreed the selection of a shorter pay period of a fortnight. By s 323(1)(a) Woolworths must pay each employee the amounts payable in relation to their performance of work in full.
Whether s 323(1)(a) prevents attribution of over-award payments across pay periods is a difficult question which has not been previously decided. Contrary to the submissions of both parties there is nothing straightforward about it. Woolworths submitted (at [419]) that the decision of the Full Bench of the Fair Work Commission in Re Annualised Wage Arrangements [2018] FWCFB 154; 274 IR 29 at [102] shows that a properly drafted annualised salary arrangement can be effective to allow set-off over the course of the year. I do not agree. What the Commission said was this:
Of course it is not necessary to have an annualised wage provision in a modern award in order for an employer to be able to pay an employee to whom the award applies an annualised salary that compensates for or “buys out” various identified award entitlements. The principles by which this might be done were stated in the Federal Court Full Court decision in Poletti v Ecob (No 2) and subsequently affirmed in the Full Court decisions in Australian & New Zealand Banking Group Ltd v Finance Sector Union of Australia and Linkhill Pty Ltd v Director, Offıce of the Fair Work Building Industry Inspectorate. In short, under a contract of employment the employer and employee may agree that the salary payable under the contract has the purpose of satisfying the obligation to pay identified award entitlements (such as, for example, base wages, overtime rates, shifts and weekend penalty rates, allowances and annual leave loading). The payment of salary pursuant to such a contract of employment may be relied upon by the employer as satisfying in part or whole any claim by the employee for under-payment of the identified award entitlements. However this means of paying an annualised wage to an employee to whom a modern award applies is not entirely free from legal difficulty. If there is a lack of a “close correlation between the nature of the contractual obligation and the nature of the award obligations”, then payment of the salary may not satisfy the relevant award entitlements. Further, the fact that an annual salary provided for in a contract of employment may, over the course of a year, equal or exceed identified award entitlements such as to discharge payment of them may, arguably, not amount to compliance with an award requirement that pay entitlements are required to be made to the employee within a specified pay period. Issues such as these may make the payment of a salary pursuant to an annualised wages provision in a modern award a more desirable and legally certain option.
(footnotes omitted)
What this passage shows is that there are real doubts as to whether what has been sought to be done in this case can be done. The last sentence shows that the Commission’s proposed solution is not the one misattributed to it by Woolworths in its submission – namely a well-drafted annual salary provision – but rather the insertion in an award of a provision authorising the payment of a salary pursuant to an annualised wages provision. I do not regard the Commission’s decision as assisting either party in the resolution of the question but it does underscore that the problem at hand is of some difficulty.
Returning to the issue, in each fortnight, Woolworths has two sets of payment obligations. The first consists of its obligation to pay a fortnightly instalment of the annual Remuneration. The second consists of its obligation to pay amounts due under the Award each fortnight.
As a matter of contract law, there would be no difficulty with an attribution clause which provided that payment by Woolworths of the fortnightly amounts of the annual Remuneration was to be in complete satisfaction of its obligations to make fortnightly payments under the Award. This would be so even if the amount of the fortnightly Award payments exceeded in a given fortnight the fortnightly amount of annual Remuneration. At common law, nothing prevents a creditor and a debtor from agreeing that the payment of a smaller debt will also discharge a larger debt.
The position is more complex in an employment context governed by s 323(1) for it is not possible for an employer and employee to contract out of obligations imposed upon an employer by an industrial instrument such as the Award. The reasons for this are perhaps less than obvious but they are provided by s 323(1)(a): amounts which are payable to an employee are to be paid in full. Amounts may be payable to an employee by reason of a contractual entitlement but they may also be payable by reason of an industrial instrument. A payment under a contractual provision which purported to discharge the employer’s obligation to pay an employee’s entitlements under an industrial instrument but which was less than those entitlements would fall foul of s 323(1)(a). It would result in the award entitlements being paid less than in full.
However, I agree with Woolworths that s 323(1) is not the source of award entitlements. The relevant award is. Section 323(1) governs only the manner in which those pre-existing entitlements are to be paid. A failure to meet the methodological prescription in s 323(1)(a) that payment be ‘in full’ constitutes a contravention of the provision but does not preclude a partial payment from discharging, as far as it can, award entitlements. It follows that it is not an invalidating characteristic of an attribution clause in an employment situation that payments made under it which purport to discharge award entitlements may not completely discharge those entitlements.
In saying that, I reject Woolworth’s submission that s 323(1) is shown by secondary materials to be concerned to prevent payments in kind in such a way as to limit the meaning of ‘in full’ in s 323(1)(a). Resort to the passages cited by Woolworths of the Explanatory Memorandum which accompanied the Fair Work Bill 2009 (Cth) shows that the avoidance of payments in kind was the purpose of s 323(1)(b), not s 323(1)(a).
Notwithstanding that s 323(1) merely regulates pre-existing obligations, it is instructive that the provision requires an employer to ‘pay’ those obligations. This is reflected in the language of cll 23.1 and 29.2 of the Award, which respectively require that wages and overtime be ‘paid’. The monetary obligations arising under the Award are therefore obligations to pay and may only be discharged by a payment.
Clause 6 of the contract does not operate by reference to a payment. Rather, it provides that ‘the Remuneration and other benefits under this Agreement’ will be ‘in satisfaction’ of Woolworths’ obligation to make payments under the Award. The term ‘Remuneration’ is defined in the agreement to consist of the three annual elements I have mentioned: a base salary, a car allowance and superannuation. As such, the Remuneration as defined is an annual sum of money. Whilst contractually and by reason of the Award the Remuneration is to be paid fortnightly, the fortnightly payments are not what cl 6 seeks to operate upon.
Rather than providing that ‘the payment of the Remuneration and other benefits will be in satisfaction’ of the Award payments, cl 6 provides only that ‘the Remuneration and other benefits under this Agreement will be in satisfaction’ of the Award payments. If it had said ‘the payment of the Remuneration and other benefits’ then this would necessarily have linked the obligation to make those fortnightly payments to monetary obligations falling due in the same fortnight under the Award.
That it does not do so is probably not accidental. It is evident that the drafter of cl 6 had in mind, at least ‘as far as possible’, pooling over-Award payments across a six month period and then providing for the acquittal of award payment obligations across the same period. Such a pooling arrangement cannot operate if the concept of payment is allowed to intrude. If the fortnightly payment obligation is referred to instead then the 26 week pool is broken into 13 self-contained segments and pooling cannot occur outside each fortnight.
As it stands, cl 6 is therefore a most curious provision. It purports to discharge monetary obligations arising under the Award by reference to a sum calculated across a 26 week period which is never payable and which is itself never paid. Subject to questions of contractual certainty (to which I will briefly return), I do in principle accept that this could be done as a matter of contract law. A party may discharge a monetary obligation by any agreed means including, for example, by tender of performance. If that be so, I do not see why the parties could not also agree that a monetary obligation might be discharged because of the existence of an accounting abstraction rather than some other payment obligation. Here the accounting abstraction is the sum of the 13 fortnightly payments which occur over the 26 weeks referred to in cl 6. It is an accounting abstraction because there is no obligation to pay that sum under the contract or the Award. Its abstract nature is underscored by the fact that the notional sum consists of 13 fortnightly payments which have either already been paid or have not yet been paid. The abstract nature of this accounting device shows why it cannot be the subject of a payment obligation for it would be meaningless to speak of an obligation to pay such an abstraction. Even so, as I have said, as a matter of contract law the parties could agree that such a notional pool could be used to discharge some other payment obligation (in the same way that a non-monetary act such as tender of performance may by agreement discharge a monetary obligation).
However, whether that be so as a matter of contract law or not, I do not accept that an accounting abstraction can be used to discharge monetary obligations imposed by an industrial instrument. The Award requires an employer to ‘pay’ the amounts which are due and the existence of an accounting abstraction is not a payment.
Thus, the vice of cl 6 is that it does not identify a payment which can actually operate to discharge Woolworths’ obligations to make payments in full of the employee’s entitlements under the Award. This is not to conclude that an attribution clause cannot work in an employment context. Rather, it is to conclude that any such attribution clause can only discharge award payment obligations with actual payments. Since cl 6 does not identify a payment to discharge the Award payment obligations but rather a pool which is not payable and is not paid, it cannot discharge the payment obligations imposed by the Award.
If the matter is left on this basis, then cl 6 does not operate in any case to discharge Woolworths’ obligations to make payments under the Award. I think it unlikely that either the employees or Woolworths understood that the bargain they were agreeing to was that Woolworths would pay the employees an annual salary, car allowance and superannuation and then, on top of that, all of the employees’ entitlements under the Award. That is an absurd situation which the parties can hardly be taken to have intended.
To avoid this outcome, it is necessary to read the reference to ‘the Remuneration and other benefits under this Agreement’ as ‘the payment of the Remuneration and other benefits under this Agreement’. So construed cl 6 refers to fortnightly payments of the Remuneration and, as such, can lawfully operate as an attribution clause. Each fortnightly payment of the Remuneration will discharge an equal amount of any obligations falling due in that fortnight under the Award.
That construction renders ineffectual the reference in cl 6 to a 26 week period. I do not think that this is a problem. Clause 6 is qualified, as I have noted, by the words ‘as far as possible’. For the reasons I have given, six monthly pooling is not possible (at least in the present circumstances) but fortnightly pooling is. The only possible operation of cl 6 is therefore to set off Woolworths’ payment obligations under the Award on a fortnightly basis. There is no need to read down the reference to 26 weeks to two weeks because, on the above reading of the clause, the words ‘payment of’ already have the effect of pooling across each fortnight. The reference to 26 weeks can simply be disregarded.
Whilst it is not necessary to form a view about this for the purposes of this litigation, it is doubtful in my mind that cl 6 could ever be redrawn to achieve a six monthly pooling. It is unlikely that payments which have occurred in past pay periods can be characterised as payments for the purposes of the Award. For the same reason, I think it unlikely that payments in the future can be characterised as payments in the present pay period either. If this be correct, then a six monthly pooling operation for cl 6 cannot be resurrected by careful drafting.
I have mentioned above the problem of contractual certainty. Without elaborating on this in any detail, the problem arises because what the employer is obliged to pay in any pay period cannot, in many cases, be known until the end of the six month period. Given the way I believe cl 6 must be construed however this problem does not arise.
I have been unable to identify an authority which directly considers whether an employer is prevented from setting off against its obligations under an award in one period the amount of over-award payments in the past or which may yet happen. Goldberg J refused an attempt by an employer to set off against award underpayments in some weeks the amounts paid to the employees in other weeks which exceeded the award entitlements: Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406; 121 IR 250 (‘Givoni’) at [60]-[65]. However, his Honour’s reasoning was based on the application of the designation limitation in Poletti v Ecob rather than the possibility of set-off between pay periods. As such, I do not think that the decision either aids or detracts from the conclusion I have reached.
Both parties also suggested that Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400 (‘Transpetrol’) is relevant to this point. The employees in that case, crew members on an oil and chemical tanker, were paid a salary by Transpetrol according to a uniform scale irrespective of which nation’s law governed their employment contract. To cater for discrepancies in different national laws and for other requirements peculiar to maritime employment, the gross sum for which that salary scale provided was in excess of that required by the relevant Australian award. Rares J accepted that Transpetrol could apply the excess to set off (in part) certain overtime and ordinary wage entitlements under the award which the FWO alleged had not been fully paid.
Two points should be noted about Transpetrol. First, it is not at all clear that the result in the case was that amounts paid in one period could be used to set off award obligations in a different period. If the crew members’ salary (including the excess) was paid at regular intervals, as would assumedly have been the case, then the overtime and ordinary wage entitlements said to have been underpaid may have arisen in the same period as the salary payment such that there would be no set-off between pay periods. Secondly, the contest between the parties was confined to whether Transpetrol had designated the excess to purposes other than satisfying any entitlement to wage rates and overtime payments so as to engage the designation limitation. As such, Rares J was not confronted with any argument as to the possibility of set-off between pay periods and I do not consider the decision to say anything on that point.
It is then necessary to deal with the Full Court’s decision in Wardman. There were a number of issues in the case one of which related to annual leave loading. Clause 24.3 of the award in that case provided that during a period of annual leave an employee would receive a 17.5% loading, or the relevant weekend penalty rates whichever was the greater, calculated on the relevant rate of wage. A number of employees had brought proceedings against the respondent bank. At [57] Wheelahan J noted that a global approach had been taken to the position of the various employees which had resulted in ‘cost and efficiency benefits’ in the litigation but that by taking this global approach ‘individual employees may have made some compromises in the way their claims were advanced’. The employees had been paid commissions on top of their base salary. The main issue was whether these commissions discharged the bank’s obligations under the award including the annual leave loading. The trial judge had concluded that the payments did not include payments on account of leave, annual leave or public holidays. There were 48 employment contracts involved in the appeal. All but three of these did not involve a contractual attribution clause and are not relevant for present purposes. However, in three cases – Haslem, McKenzie and Ryan – there was a contractual attribution clause in these terms:
You acknowledge and agree that payments made in satisfaction of your remuneration and other benefits provided for in this Agreement (including the annual salary component of your BCR) are all-inclusive over-award payments and will be set off against any payment or benefit to which you may become entitled as a consequence of your employment (whether under legislation, an award or another industrial instrument) including but not limited to minimum hourly rates, allowances, overtime and penalty rates and loadings.
Wheelahan J accepted at [185] that this clause was effective in their cases to discharge the bank’s obligation to pay the annual leave loading. In relation to these three employees both Bromberg and Snaden JJ agreed with Wheelahan J: [47], [287]. Wheelahan J then addressed the apparent temporal aspect of the annual leave loading to observe that it was not contended by the bank that it had paid a higher wage when the employee was on annual leave. Rather, what appears to have happened is that the same base salary was paid throughout the year so that the obligation to pay the annual leave loading was discharged by the making of a payment in all 52 weeks. What his Honour said at [187]-[188] was this:
First, I recognise that the Bank did not seek to argue that Haslem, Mackenzie, or Ryan received additional remuneration or any higher rate of pay whilst on annual leave, as compared to other periods throughout the year. This may appear to be at odds with the temporal nature of the obligation in cl 24.3 of the Award to pay the loading “[d]uring a period of annual leave.” But there is no reason why the Bank and each of the three employees, under the terms of their respective employment agreements, could not allocate the monthly salary in satisfaction of any monetary entitlements owing to the employees under the Award, if and when those entitlements arose. Provided that the fixed monthly payments were, throughout all relevant pay periods, sufficient to discharge the Bank’s statutory obligations, it is of no consequence that the exact amounts owing pursuant to those obligations may have risen or fallen from time to time (for example, during a period when an employee took annual leave).
Secondly, it is worth restating that it was no part of the case put by any of the employees, at first instance or before this Court, that the monthly salary component of the BCR fell below the minimum rates of pay that they were entitled to receive under the Award, with or without the additional 17.5% loading annual leave loading. I have concluded that the Bank could rely on the monthly salary component of the BCR in satisfaction of its Award obligations to pay the employees a minimum salary or wage. In relation to Haslem, Mackenzie, and Ryan, I have also concluded that the Bank could rely on the payments in satisfaction of its Award obligation to pay annual leave loading. It is of course possible that, when one examines the actual cash amount that each employee was paid as the salary component of his or her BCR each month, some employees may have received less than what they were owed under the Award. However, that case was not put by the employees. It is not open to this Court, on the material before it, to make such a finding. This may be an example of a pragmatic forensic choice made by the employees in pursuing a global approach to this litigation, to which I referred at [57] above.
What follows from this is that his Honour was not confronted with the temporal difficulty which arises in the present case and, in particular, the question of whether the discharge of a payment obligation imposed by an award in one period may be discharged by something which is not a payment such as a pool across a period. I therefore do not think that his Honour’s reasoning has anything to say about the present question and I do not think the holding in Wardman stands in the way of the conclusion I have reached.
There are a large number of decisions dealing with set-off arrangements in an employment context: see Ray v Radano [1967] AR (NSW) 471 (‘Ray v Radano’); Poletti v Ecob; Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; 111 IR 227 (‘ANZ v FSUA’); James Turner Roofing Pty Ltd v Peters [2003] WASCA 28; 132 IR 122 (‘James Turner Roofing’); Lynch v Buckley Sawmills Pty Ltd [1984] FCA 348 (‘Lynch v Buckley Sawmills’); 3 FCR 503; Linkhill; Transpetrol; Wardman; Rossato. I have not found that any of these decisions throw light on the present question.
In those circumstances, I conclude that cl 6 must be read so that it applies within a fortnightly pay period.
Other arguments
Woolworths advanced some other submissions on this topic. I reject each of them. First, as I have indicated already I do not accept that the secondary materials about s 323(1) show that the reference to payment ‘in full’ in s 323(1)(a) was directed to preventing payments in kind. Those materials show that this was the purpose of s 323(1)(b) not s 323(1)(a).
Secondly, I do not agree that the decision in Coote v Mainline Access Pty Ltd (No 3) [2019] FCCA 383; 344 FLR 1 at [42] carries the implication that Woolworths suggests at [366] of its submissions.
Thirdly, although as noted above s 323(1) regulates how pre-existing monetary obligations are to be discharged, it probably does not follow, as Woolworths submits, that an underpayment by an employer cannot constitute a contravention of s 323(1). However, it is not necessary to determine the answer to this question since the present issue is not whether Woolworths has contravened s 323(1).
Fourthly, Woolworths makes a more substantial point when it submits that the terms of the Award recognise that additional payments under the Award may become due on the occurrence of events which are outside of a pay period. For example, cll 28.3 to 28.5 make provision for particular roster arrangements to be implemented in each shop including as to the working of 19 days in each four week cycle. An employee may be entitled to overtime when required to work outside those roster conditions: cl 29.2. The argument then is that it cannot be known in advance when the entitlement to overtime accrues. Since that cannot be known it cannot be the case that Award entitlements must be paid in a particular pay period since the pay period in which the entitlement accrues is itself not known. However, I do not consider that this is a problem. At some point the entitlement accrues. No obligation to pay the entitlement exists before it has accrued and I do not see why the obligation to pay the entitlement would not arise in the pay period in which it accrues. Put another way, difficulty in identifying when particular entitlements accrue is not a reason for not construing the payment obligations under the Award the way I would. It is, rather, the familiar problem of determining when a given entitlement accrues.
Fifthly, Woolworths makes an allied submission that there are some award entitlements which only accrue on an annual basis. An obvious one is the payment of an annual leave loading. However, I do not see that there is a problem here either. Woolworths is obliged to pay a loading of 17.5% on annual leave which has accrued and which is taken: cl 32.3(a). The loading is only payable ‘during a period of annual leave’. Consequently, I do not see that this is an example of an annual entitlement which accrues at a different time to a payment period. The obligation to pay only arises in those pay periods where the employee is taking annual leave.
Outcome on Issue 46
If construed literally, cl 6 is ineffective to bring about a payment of the employees’ entitlements since the pool it refers to is not a payment. ‘The Remuneration’ should be construed to mean ‘the payment of the Remuneration’ and the six month machinery should be disregarded. It follows from what I have said that cl 6 is not contrary to public policy, void or otherwise of no effect. It has the effect that each fortnightly payment of the Remuneration by Woolworths discharges an equal amount of any obligations falling due in that fortnight under the Award.
A.2 FWO v Coles
The wording of the corresponding clause in FWO v Coles was not identical to the wording in FWO v Woolworths. There seem to have been five types of clauses as set out in Coles’ closing submissions at [764]:
(1)Your cash salary is in satisfaction of all entitlements otherwise payable to you under any relevant industrial instrument. The terms of any relevant industrial instrument are not terms of your contract of employment.
(2)Your cash salary includes compensation for all entitlements, benefits or payments that might otherwise be due under any industrial instrument.
(3)In consideration of the nature of the hours your role requires you to work, you will also be paid an additional amount of ${insert amount} per annum (‘additional compensation’). This additional compensation will be paid in equal instalments together with the cash salary component of your TFC. Your total TFC (including statutory superannuation) and additional compensation is in full satisfaction of all monetary benefits which might otherwise be payable under the General Retail Industry Award 2010, including minimum wages, overtime, penalties, loadings and allowances.
(4)Your total TFC (including statutory superannuation) is in full satisfaction of all monetary benefits which might otherwise be payable under the General Retail Industry Award 2010, including minimum wages, overtime, penalties, loadings and allowances.
(5)Your salary includes compensation for all entitlements, benefits or payments that might otherwise be due under any industrial instrument that may apply to your employment including but not limited to:
i. overtime;
ii. penalty payments for out of hours work;
iii. shift loadings; and
iv. any other loadings, penalties, overtime or allowances.
Accordingly, you will not be paid any special rates or allowances for working particular times or under particular conditions unless otherwise agreed in writing.
In relation to two of the Salaried Employees, it appears that there was no written contract. Issue 73A involves Coles’ contention that a term was implied into these two contracts of employment along the same lines as the clauses I have just outlined above. Such a term is not so obvious that it goes without saying and on that account alone would not be implied: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. Coles’ submissions to the contrary are rejected. The FWO submitted that absent such an implied term the payments of salary which were made by Coles in the discharge of its contractual obligations to pay a salary under these unwritten agreements could not discharge its obligations under the Award. However, it is not necessary that there be an attribution clause, whether express or implied, in order that a payment made under a contractual obligation simultaneously discharge an award obligation. So much is clear from Wardman where most of the contracts under consideration did not contain an express attribution clause but it was nevertheless held that the monthly payments of salary under the contract were sufficiently correlated with the award obligation to pay salary or wages as to satisfy that obligation: [44] per Bromberg J, [162] per Wheelahan J.
Rather, a touchstone commonly deployed for determining whether a payment under a contractual obligation will simultaneously discharge an award obligation (absent an express attribution clause like that in FWO v Woolworths) is whether there is a coincidence of purpose or at least a close correlation between the nature of the two obligations: ANZ v FSUA at [47], [51]-[52] per Black CJ, Wilcox and von Doussa JJ; Linkhill at [98] per North and Bromberg JJ; Wardman at [131] per Wheelahan J. There is some difficulty in answering that question where the contractual obligation is, as here, unwritten. Nonetheless I would conclude that there is a close correlation (as in Wardman) between the payments of salary by Coles and Coles’ obligation under the Award to pay the minimum wages on the working of ordinary hours. Thus, the payment of the salaries discharged the minimum wages due under the Award. In the absence of any evidence from Coles as to what it intended by those payments, I am unable to see how they can plausibly be seen as being connected to any of Coles’ other obligations under the Award.
Returning to the five exemplar clauses, I accept that as in Wardman each of these clauses is drafted in such a way as to capture the relevant obligations that Coles incurred under the Award to make payments. For the reasons I have given in FWO v Woolworths I do not accept that it is possible to discharge Coles’ obligation to pay the entitlements falling due under the Award by anything other than an act of payment (rather than, for example, the existence of an accounting abstraction such as a pool over a six month period). As I have explained above, I accept that in an employment context a properly drafted set-off clause may provide that payment of a contractual obligation in a pay period may discharge a payment obligation arising under an industrial instrument in the same pay period. When this occurs a single payment discharges the two distinct monetary obligations. However, the obligations arising under the Award can only be discharged by a payment and that necessitates that the payment happen in the same pay period.
In this case, Coles has approached the calculation of its employees’ entitlements under the Award on the basis that the five different clauses could have the result of discharging its obligations to make payments under the Award. Whilst I would accept that the clauses may have this effect within a pay period, they cannot have such an effect where the payment sought to be set off falls in a different pay period. Coles drew my attention to a series of decisions in which the possibility that set-off outside pay periods might not be available was countenanced: Ray v Radano at 478 per Sheldon J; Lynch v Buckley Sawmills at 509 per Keely J; Givoni at [35] per Goldberg J; James Turner Roofing at [21] and [45] per Anderson J. It also drew my attention to two cases where an approach appears to have been taken that set-off outside a pay period was possible: TransAdelaide v Leddy (No 2) (1998) 71 SASR 413 (‘TransAdelaide’) at 432-433 per Doyle CJ (with whom Lander J agreed at 433) and Transpetrol at [114]-[117] per Rares J. In none of these decisions was the argument put that award entitlements can be discharged by something which is not a payment in the relevant payment period. I thus do not think that these cases throw any real light on the present issue one way or the other.
In Woolworths’ case it was possible to reinterpret the clause so as to avoid conflict with s 323(1). I see no reason why a similar approach cannot be taken here, by reading the references to ‘your cash salary’ (in the first and second clause), ‘your TFC’ (in the third clause), ‘your total TFC’ (in the fourth clause) and ‘your salary’ (in the fifth clause) to be preceded by ‘payment of’. This has the effect, as in Woolworths’ case, of tying the set-off clauses to Coles’ payment period so as to give the clause a lawful operation as an attribution clause.
By contrast to the clause in FWO v Woolworths, each of the five clauses relied upon by Coles purports expressly to satisfy ‘all’ entitlements (and, in the case of the third and fourth clauses, to satisfy such entitlements ‘in full’). This might be taken to evidence an intention that the clause should only operate if it can wholly satisfy all award entitlements. If the clauses were to fail on this basis, the principles stated above in respect of the unwritten contracts would apply with the result that Coles’ salary payments operated only to discharge the minimum wages due under the Award. It is unnecessary to decide this issue, however, because the FWO submitted that the contractual payments by Coles and Woolworths ‘are not to be discarded in whole’ and can be accounted for in part discharge of its Award obligations.
I therefore find that as in FWO v Woolworths the set-off clauses in FWO v Coles lawfully operate within a payment period. Each salary payment will discharge an equal amount of any obligations falling due in that payment period under the Award.
PART B: RECORD-KEEPING AND SECTION 557C
The FW Act requires employers to keep certain records relating to their employees. The FWO alleges that Woolworths and Coles have contravened this requirement and seeks the imposition of a civil penalty. The FWO also alleges that after 15 September 2017, s 557C operates so that, in those cases where Woolworths and Coles have failed to keep the employment records, they are required to disprove the FWO’s allegations of contravention.
Each proceeding raised issues in respect of the record-keeping obligations and s 557C. In FWO v Woolworths, these were Issues 37 to 40 which were expressed by the parties in these terms:
Issue 37
Do the record-keeping obligations in reg 3.33 of the FW Regulations apply if an employee is paid an ‘all-inclusive salary’?
Issue 38
Are the record-keeping obligations in reg 3.34 satisfied when an employer has kept a record of the rostered and worked hours of an employee who is paid an ‘all-inclusive salary’?
Issue 39
If the FWO establishes that the record-keeping obligations in regs 3.33 and 3.34 of the FW Regulations have not been met by Woolworths during the period 15 September 2017 to 30 September 2019, then upon the proper construction of s.557C of the FW Act, does Woolworths have the burden of disproving:
(a) the whole of each of the allegations of contravention in Section E of the FASOC for alleged underpayments in that period; or
(b) only the factual allegations that the Calculation Employees had worked the alleged hours of work in Section E of the FASOC and the relevant annexures, giving rise to the alleged underpayments?
Issue 40
Does Woolworths bear the onus of disproving any of the factual allegations in E.1 to E.13 of the FASOC with respect to the alleged contraventions concerning hours worked by Salaried Employees if the Court finds that Woolworths has not kept records as required by reg 3.33 and reg 3.34 of the FW Regulations?
The parties in Baker adopted Issues 38 and 40 from the FWO v Woolworths. Issue 13 in Baker set out below was expressed to be a ‘unique’ issue but it bears substantive similarity to Issue 39 in FWO v Woolworths:
Issue 13
If the Applicants establish that the record-keeping obligations in reg 3.34 of the FW Regulations have not been met by Woolworths during the Calculation Period, then upon the proper construction of s.557C of the FW Act, does Woolworths have the burden of disproving:
(a) the whole of each of the allegations of contravention in paragraphs 19 to 40 of the FASOC; or
(b) only the part of the allegations that relate to the number of hours worked and when those hours were worked.
A further issue was also raised in Baker:
Issue 12
If the Respondents were required to make and keep records of overtime hours actually worked by an employee, then did the Respondents' direction to each employee to use a clock in/clock out system to record their hours of work satisfy the requirement to make records of overtime hours actually worked by each employee in the form prescribed?
In FWO v Coles, the relevant issues were Issues 1 to 6(a) which were expressed by the parties in these terms:
Issue 1
Do the record-keeping obligations in s 535(1) of the FW Act and regs 3.33 and 3.34 of the FW Regulations apply to circumstances where a Salaried Employee is paid an annual salary on an ‘all-inclusive basis’, or an ‘all inclusive salary’?
Issue 2
(a). Is the effect of a contractual set off clause allowing payment of an annual salary on an all inclusive basis that a Salaried Employee is not ‘entitled’ to be paid any loading, penalty rate, any other monetary allowance or separately identifiable entitlement for the purpose of reg 3.33, meaning that no record is required to be kept under reg 3.33 for that Salaried Employee?
(b) Does a contractual set off clause allowing payment of an annual salary on an all-inclusive basis mean that no penalty rate or loading (however described) ‘must be paid’ for overtime hours actually worked by the Salaried Employee, meaning no record is required to be kept under reg 3.34 for that Salaried Employee (thus excluding the operation of that regulation)?
Issue 3
If the Employer was required under regs 3.33 or 3.34 to keep a record and failed to do so, does s 557C of the FW Act mean that the employer then bears the burden of disproving an allegation that an employee is entitled to payment for an entitlement to which a failure to keep the record applied?
Issue 4
Does s 557C apply only to each particular allegation in respect of which a failure to make and keep a record is proven?
If yes, then:
(a) was Coles required to make and keep a record in relation to the particular matter alleged in relation to the particular employee?
(b) did Coles fail to make and keep a record in relation to that particular matter in relation to the particular employee?
Issue 5
(a) Did the employer have a reasonable excuse within the meaning of s 557C(2) for failing to comply with s 557C(1)(b), such that s 557C(1) does not apply?
(b) If yes to (a), for what period did the reasonable excuse apply?
Issue 6
(a) If reg 3.34 does apply to the Salaried Employees, has the employer satisfied its obligations to keep a record, which specifies:
(i) the number of overtime hours worked by the Salaried Employee each day (or any day); or
(ii) when the Salaried Employee started and ceased working overtime hours each day (or any day);
in circumstances where it has kept a record of the roster and clocking data for the hours worked by a Salaried Employee?
Issues 2, 3, 5 and 6 in Pabalan were acknowledged to be equivalent to Issues 2(b), 6(a), 4, and 5 in FWO v Coles. Issues 1 and 4 in Pabalan set out below were expressed to be similar but not identical to Issues 1 and 3 in FWO v Coles:
Issue 1
Do the record-keeping obligations in reg 3.34 of the Fair Work Regulations 2009 (Cth) (Regulations) apply to circumstances where an employee is paid an annual salary on an “all-inclusive basis”, or an “all-inclusive salary”?
Issue 4
If the employer was required under reg 3.34 to keep a record and failed to do so, does s 557C of the FW Act mean that the employer then bears the burden of disproving an allegation that an employee is entitled to payment for an entitlement to which a failure to keep the record applied?
Where there was overlap with the regulatory proceedings in respect of these issues, Woolworths and Coles adopted their submissions in that proceeding and Mr Baker and Ms Pabalan adopted the submissions made by the FWO.
In summary my conclusions are that Woolworths and Coles had record-keeping obligations under reg 3.33 and reg 3.34 in respect of the Calculation Employees and Sample Salaried Employees and did not comply with these obligations. The relevant contractual set-off clauses do not have the effect of relieving these record-keeping obligations and the roster records and clocking data are insufficient to satisfy these record-keeping obligations. In respect of Issue 12 in Baker, a direction to clock-in and clock-out are not in themselves records and so are not capable of satisfying the requirement to make records under reg 3.33 and reg 3.34.
B.1 Requirement to keep records
Section 535(1) of the FW Act requires an employer to make, and keep for 7 years, employee records of the kind prescribed by the Fair Work Regulations 2009 (Cth) (the ‘FW Regulations’) in relation to each of its employees. For the purposes of these reasons, there are three relevant record-keeping obligations:
(a)Accessibility requirement. Regulation 3.31(1)(b) requires records to be in a ‘form that is readily accessible to an inspector’.
(b)Higher rates of pay requirement. Regulation 3.33(3) requires there to be a record setting out any incentive-based payment, bonus, loading, penalty rate or other monetary allowance an employee is entitled to be paid.
(c)Overtime hours actually worked requirement. Regulation 3.34 requires that if a penalty rate or loading must be paid for overtime hours actually worked the employer must make and keep a record that specifies either the number of overtime hours worked by the employee during each day or when the employee started and finished working overtime hours.
It is convenient to begin with the submissions made in FWO v Woolworths. It is not in dispute that Woolworths did not keep records of any separately identifiable amounts of loadings, penalty rates or other monetary allowances the Calculation Employees were due (i.e. reg 3.33(3)), or of the number of overtime hours they worked or the times at which they started and finished working overtime (i.e. reg 3.34). The FWO therefore submits that Woolworths has failed to comply with reg 3.33(3) and reg 3.34. Since compliance with those regulations is required by s 535(1) it has also on each such occasion contravened that provision. Section 535(1) is a civil penalty provision.
Regulation 3.33(3)
Woolworths submits that it has not breached reg 3.33(3) (and hence s 535(1)). It made two points at [733]. First, to conclude that reg 3.33(3) applied would be to ignore the all-inclusive nature of the annual salaries which the Calculation Employees were paid. Secondly, to conclude that reg 3.33(3) was breached would involve an assumption that reg 3.33(3) requires the recording of the entitlements it specifies notwithstanding that such entitlements were not separately stipulated in the employees’ contracts or paid to those employees.
I do not accept the first submission. The requirement in reg 3.33(3) to record certain details is enlivened by the employee’s entitlement; that is, where the employee is entitled to be paid one of the entitlements in paragraphs (a) to (e) of reg 3.33(3) the record must have the required details. The form of the payment, such as it being ‘all inclusive’, does not alter that requirement. Additionally, Woolworths adopted at T1273.29 Coles’ submission, which is that the set-off clause in the employment contracts operates so that an employee is not ‘entitled to be paid’ any loading, penalty rate or other monetary allowance and reg 3.33(3) is accordingly not enlivened.
I reject that submission. Although I have rejected Woolworths’ contentions about the operation of the set-off clause in the contracts of employment, there can be no escaping that the endpoint of its submissions is that its obligation to pay the employees their remuneration in full each pay period was, in fact, discharged successfully by the set-off clause. Woolworths does not submit that the effect of the set-off clause is to prevent its obligation to pay amounts under the Award from arising in the first place. Rather, its submission is that its obligation to pay has been discharged by the operation of the set-off clause. Although I do not agree that Woolworths’ set-off clause is, in fact, effective to discharge its obligation to make payments under the Award (other than in the same pay period) this does not matter for present purposes. What matters instead is that Woolworths’ obligation to pay is an admitted feature of the landscape which the set-off clause takes as its point of departure. The converse of its obligation to pay is, of course, the employee’s entitlement to be paid which is the concept which is the express subject matter of reg 3.33(3). It follows that even if Woolworths’ set-off clauses were wholly effective (which they are not), they could not have the effect of abnegating Woolworths’ obligations under reg 3.33(3). Since it is enlivened, the record required by reg 3.33(3) therefore needs to set out the details of the employee’s entitlement to be paid any loading, penalty rate or other monetary allowance.
The parties should apply these reasons to determine Ms Pabalan’s claims after 15 September 2017. To the extent that there is any further disagreement, the matter can be relisted.
PART H: COMPENSATION
The parties made submissions about the order in which overtime triggers should be approached. I have dealt with that issue above at Part G.1. They also made submissions about the FWO’s proposed general payment distribution order which I have dealt with above at Part G.2.
In FWO v Woolworths, Issues 44 and 47 ask:
Issue 44
(a) In circumstances where:
(i) the cumulative amount of the Contractual Entitlements paid to a Salaried Employee met or exceeded the cumulative amount of a Salaried Employee’s entitlements under the Retail Award in a particular 26-week period or other period; or
(ii) the cumulative amount of the Contractual Entitlements paid to a Salaried Employee’s entitlements was less than the cumulative amount of the Salaried Employee’s entitlements under the Retail Award in a particular 26-week period or other period (Contractual Shortfall) but Woolworths has made Remediation Payments to the Salaried Employee to meet the Contractual Shortfall; or
(iii) a Salaried Employee has a contract which provides that an annual salary will be paid in fortnightly instalments and the annual salary is expressed to have taken into account working 40 hours per week, overtime, weekends, public holidays and additional hours in setting the annual salary; or
(iv) a Salaried Employee has overall been paid amounts (including any Remediation Payment) in respect of a particular 12-month period or in respect of the whole of the Employment Period which were greater than the Salaried Employee’s entitlements under the Retail Award for the same period, then:
(b) has Woolworths contravened clause 23 (or any other term) of the Retail Award;
(c) if so, has Woolworths underpaid the Salaried Employee in respect of any Award Entitlements with respect to the particular 26-week period or other period; and
(d) has the Salaried Employee suffered any loss, or is there appropriate justification to invoke the Court’s discretion to make an order for compensation under s 545 of the FW Act?
(e) if the answer to issue 44(d) is yes, should the Calculation Employees be awarded compensation under s 545 of the FW Act to the extent that Woolworths paid them less than their minimum entitlements under the Retail Award for work performed in:
(i) a particular pay period; or
(ii) over a 26-week period, in accordance with the “Minimum Entitlements” clause in the employees’ contracts of employment; or
(iii) over a different period?
The issues between the FWO and Woolworths concerning compensation turn on s 545(1) and (2)(b) of the Act which provide:
545 Orders that can be made by particular courts
Federal Court and Federal Circuit and Family Court of Australia (Division 2)
(1) The Federal Court or the Federal Circuit and Family Court of Australia (Division 2) may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
Note 1: For the court’s power to make pecuniary penalty orders, see section 546.
Note 2: For limitations on orders in relation to costs, see section 570.
Note 3: The Federal Court and the Federal Circuit and Family Court of Australia (Division 2) may grant injunctions in relation to industrial action under subsections 417(3) and 421(3).
Note 4: There are limitations on orders that can be made in relation to contraventions of subsection 463(1) or (2) (which deals with protected action ballot orders) (see subsection 463(3)).
(2) Without limiting subsection (1), orders the Federal Court or Federal Circuit and Family Court of Australia (Division 2) may make include the following:
(a) an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;
(b) an order awarding compensation for loss that a person has suffered because of the contravention;
(c) an order for reinstatement of a person;
(d) an order requiring a person to comply, either wholly or partly, with a notice (other than an infringement notice) given to the person by an inspector or the Fair Work Ombudsman.
This empowers the Court, in its discretion, to award compensation ‘for loss that a person has suffered because of the contravention’. The person must therefore suffer a ‘loss’ and that loss must be causally connected to the contravention. Whilst the ‘but-for’ test is unlikely to be the exclusive test by which causation is to be judged under s 545, it is a useful place to start. It is particularly useful, used carefully, as a criterion for excluding causation. Finally, s 545(1) is discretionary and the power may be used, in an appropriate case, to award less than full compensation for a loss.
There appear to be three issues between the FWO and Woolworths. These are:
(a)The Bonus Payments Issue. Some Woolworths employees were paid bonuses under its Short Term Incentive Plan. Woolworths submitted, and the FWO denied, that these payments should be brought to account in assessing any loss that an employee suffered by reason of Woolworths’ contraventions of the Award.
(b)The Salary Team Pay Review Issue. Woolworths has paid all of the Calculation Employees amounts intended to compensate them for underpayments of overtime (‘STPR payments’). The FWO accepts that these payments should be brought to account in determining the quantum of compensation. However, the FWO does not accept that the STPR payments have the effect of preventing the infringements to which they relate from arising.
(c)The De Facto Set-Off Issue. Woolworths submits that even if its set-off clause is ineffective, nevertheless, in assessing whether an employee has suffered loss the Court should approach the question across the whole year of salary. For example, if the set-off clause is only effective within a pay period, then Woolworths seeks to bring to account to its credit in the assessment process for each fortnight where the salary payment exceeded the employee’s Award entitlement, the amount of that excess.
H.1 The Bonus Payments Issue
I do not accept that the loss suffered by an employee because Woolworths failed to pay that employee what the Award required to be paid is to be reduced because Woolworths made a bonus payment under the STIP. The relevant clause of the employment contract was as follows:
4) Short Term Incentive Plan [IF STIP ELEIGIBLE IN NEW ROLE]
In your current position, you are eligible to participate in the Woolworths Short Term Incentive Plan as varied from time to time (STIP). For the current financial year and in your current position, you have the potential to receive a payment under the STIP of up to a maximum of 20% of your Base Salary, less applicable taxation, based on the Company’s and your performance.
The Company will determine whether you are entitled to a payment under STIP, and the amount of any payment in its absolute discretion.
Any payments which the Company may determine to pay you under the STIP are:
(a) in addition to you Remuneration; and
(b) inclusive of the minimum level of superannuation contributions that the Company must make for you in respect of the amount of the STIP Payment under SG Legislation.
The Company may rescind, vary or replace the STIP at any time at its absolute discretion.
Nothing in this clause affects the right of either you or the Company to terminate this Agreement.
This is a separate contractual entitlement of the employee which is a function of the employee’s performance together with Woolworths’ performance. It is a payment in addition to the remuneration under the contract of employment and it is clear it is not a payment directly related to the performance of work. The terms of the agreement explicitly contemplate that if the superannuation guarantee levy charge is due on the STIP payment then Woolworths may deduct this from the STIP.
Woolworths will be entitled for a credit for a payment of STIP if it can show that the payment, or part of the payment, is causally connected to its contraventions. Put another way, if Woolworths can show that if it had paid the entitlements due in each payment period that it would have decreased the size of the STIP payments correspondingly, then I would accept that it would be entitled to a credit for the STIP payment. This would follow on orthodox principles of causation.
However, I was not taken to any such evidence. As such, Woolworths’ submission that it is entitled to a credit for the STIP payments rests on an unproved assumption of causality. There is no reason therefore to reduce its liability under s 545(1) by the amount of such payments.
To the extent that Woolworths reused the same submission to suggest that the discretion in s 545(1) should be exercised not to award this element, I do not accept that submission.
H.2 The Salary Team Pay Review Issue
It is not evident to me that there is any issue here. The FWO accepts that the STPR payments should be brought to account in determining compensation under s 545. What the FWO denies is that any such payment can have the effect of preventing the anterior infringement from arising.
I did not apprehend Woolworths to make such a submission. However, to the extent that any such argument was advanced I would not accept it. The question of contravention is to be assessed at the end of each pay period. What happens in that pay period cannot be retrospectively altered for contravention purposes.
Subsequent compensatory payments will be relevant for two purposes: (a) they are admissible in determining compensation under s 545; and, (b) they are relevant to the assessment of any penalty for contravention.
H.3 The De Facto Set-Off Issue
I have concluded that its annual set-off clause was not effective outside the fortnightly pay period. In that event Woolworths submitted that the Court should still assess an employee’s compensation across the whole year to determine whether loss had been suffered. In particular, the Court should bring to accounts to its credit each pay period where the employee was paid more than their Award entitlements. An example will illustrate the submission. Assume that:
(a)an employee is paid $2,000 per fortnight;
(b)the minimum Award wages for ordinary hours for a fortnight is $1,800;
(c)for 21 fortnights of the year, the employee works only ordinary hours on weekdays and is entitled to no other payments or loadings under the Award;
(d)for five fortnights of the year, the employee does overtime each fortnight to the value of $500; and
(e)the employer makes no additional cash payment to the employee for the $500 payments in (d).
For the five fortnights in (d), Woolworths is entitled to set off the $200 it pays in excess of the wages for ordinary hours due under the Award (being the $2,000 in (a) less the $1,800 in (b)) against the $500 overtime it owes in each fortnight. But even with that set-off it was still obliged to pay the employee $300 in each of those fortnights. Its failure to make these five $300 payments is a contravention of the Award. The total underpayment is $1,500.
On other hand, across the 21 fortnights where it is only obliged to pay ordinary wages it pays $4,200 more than it was obliged to under the Award (($2,000)-$1,800)= $200 x 21=$4,200).
Woolworths’ submission is that in assessing the loss suffered by the employee because of Woolworths’ failure to pay $1,500 for the overtime for the five fortnights, the fact that he or she received $4,200 more than the Award required for the 26 fortnights should be set off against the $1,500 so that no compensation should be payable.
I do not accept this submission. The employee is to be restored to the position he or she would have been if the contraventions had not occurred. In that counterfactual, the employee would receive the $1,500 for overtime but they would still have received their full salary of $2,000 for the 26 fortnights. This is because Woolworths was always contractually obliged to pay the salary.
To the extent that the submission was advanced as invitation to reduce the compensation payable under s 545(1) by the exercise of the discretion, I reject the submissions for the same reasons.
A similar question was addressed by Issues 38 and 40 in Pabalan which ask:
Issue 38
If it is found that Coles has contravened s 45 of the FW Act as alleged, is Coles able to set off the cash salary component of the total financial compensation paid to any salaried employee against any liability it has to that employee under the FW Act?
Issue 40
Would it be appropriate within the meaning of s 545 of the FW Act to make an order for compensation which does not take into account the amount paid to an employee under the contract of employment that is over and above the minimum rate of pay in the Retail Award (the Over Award Amount) and should the Court exercise its discretion pursuant to s 545(2)(b) of the FW Act to reduce any compensation otherwise payable to a salaried employee by the Over Award Amount.
For the same reasons as above, Coles is not able to set off the cash salary component of the total financial compensation paid or ‘over-award’ amount against any liability it has to compensate any salaried employee under the FW Act.
H.4 FWO v Coles
Coles’ submissions were essentially the same as Woolworths although Coles did not advance an argument about bonus payments. In relation to the De Facto Set-Off Issue, Coles pursued the same result as Woolworths. However, it advanced an additional reason for doing so. It submitted that it was necessary so as to avoid double compensation. There is no double compensation. In the counterfactual where Coles paid the employee’s entitlements it necessarily continued to pay the employee’s salary since it was contractually obliged to do so. There would only double compensation if Coles elicited evidence (or the employment contract provided) that Coles was entitled to reduce its salary payments outside the payment periods. However, whilst this is what its contracts of employment provided for, this was not how they could lawfully operate. Coles’ double compensation submission only works when its erroneous understanding of the set-off clause is introduced into the counterfactual. However, for obvious reasons this cannot be done.
PART I: PLEADINGS AMENDMENT ISSUE
Lastly it is convenient to deal with an issue that arose in Pabalan in respect of amendments to the pleadings by the applicant. Issue 37 asks:
Is Coles able to rely on ss 544 and 545(5) of the FW Act in the manner set out at paragraphs 39A to 39C of its FAD?
Coles raises limitation defences in Pabalan. The relevant limitations periods appear in ss 544 and 545(5):
544 Time limit on applications
A person may apply for an order under this Division in relation to a contravention of one of the following only if the application is made within 6 years after the day on which the contravention occurred:
(a) a civil remedy provision;
(b) a safety net contractual entitlement;
(c) an entitlement arising under subsection 542(1).
Note 1: This section does not apply in relation to general protections court applications, sexual harassment court applications or unlawful termination court applications (see subparagraphs 370(a)(ii), 527T(1)(a)(ii) and 778(a)(ii)).
Note 2: For time limits on orders relating to underpayments, see subsection 545(5).
545 Orders that can be made by particular courts
(5) A court must not make an order under this section in relation to an underpayment that relates to a period that is more than 6 years before the proceedings concerned commenced.
In answer to the whole claim, Coles pleads a limitation defence at §39A-39C of its Further Amended Defence. Neither the pleading nor the written submissions in support of that pleading are comprehensible and nothing is to be gained by burdening the reader with them except perhaps a useful comparison with Heironymus Bosch’s 1515 triptych The Garden of Earthly Delights.
I.1 The First Limitation Issue
The first issue (which arises from §39A of the amended defence) is straightforward. On 24 July 2020 Ms Pabalan filed an amended originating application which replaced the former respondent Coles Group Ltd with the correct and present respondent, Coles Supermarkets Australia Pty Ltd. That amendment took effect from 24 July 2020 as a result of order 3 made by the Court on 21 July 2020. The effect of s 545(5) is that no action is maintainable against Coles in relation to underpayments which occurred before 24 July 2014.
The next question is whether there are any claims being made for underpayments before 23 July 2014.
There are certainly group members who were employed before that date. That this is so emerges from the current group definition. It defines the group in certain ways but, relevantly, as including salaried managers employed by Coles in the six years prior to the original commencement date of the litigation. The original commencement date was 18 May 2020 and the six year period before that date commenced on 18 May 2014.
It is therefore possible that there is a group member who was employed between 18 May 2014 (six years before commencement of the proceeding) and 24 July 2014 (six years before Coles was joined as a party) who has a claim for underpayment relating to the short period between 18 May 2014 and 24 July 2014.
If such a person exists then I would accept that Coles is correct in its contention that s 545(5) would be an answer to any claim made by that person. I will return shortly to the question of whether it is appropriate to answer this apparently hypothetical issue.
I.2 The Second Limitation Issue
On three occasions the group definition has been changed. Coles submits that each time new group members were added to the group, the claims of those group members date from the date they were added to the group (i.e. it does not refer back to the start of the proceeding). It then says that the effect of s 545(5) is that those new members can only maintain claims in the six year period prior to the date of their addition to the group.
I am prepared to assume this is correct, although neither party discussed when amendments arising out of the same facts were to date from for the purposes of Division of 8.3 of the Federal Court Rules.
However, even making that assumption, Coles’ submission conceals further assumptions that the amendments which were made to the group definition resulted in additional group members being added to the group. The three occasions which are said to have resulted in additional members being added to the group are as follows:
Originating Application Date of Filing Further Amended Originating Application 23 December 2020 Second Further Amended Originating Application 6 December 2021 Third Further Amended Originating Application 8 March 2022
Insofar as the Further Amended Originating Application is concerned, the amendments to the group definition appear in §4. It was in these terms:
4. The Applicant brings these proceedings
(1) for herself, and
(2) as the representative of a group constituted by all persons;
(a) employed by the Respondent (“Coles”) at any time within the period of 6 years ending on the date of the filing of the Originating Application herein (the “Relevant Period”),
(b) in a position
(i) in a supermarket in the “general retail industry” within the meaning of that phrase in the General Retail Industry Award 2010 (the “Award”),
(ii) the title of which was, or the title of which included the word, “manager”, “Coles Services Team Leader” or “Coles Services Team Leader Area Support” (a “Manager Position”), and
(iii) which was undertaken as a “full time employee” or “part time employee” as those terms are defined in the Award,
(c) who in any Pay Period in the Relevant Period worked a rostered hour
(i) which was on a Monday to Friday on what was for the purposes of the Award an evening,
(ii) outside the spread of hours from time to time prescribed in the Award for undertaking ordinary hours, or
(iii) on a Saturday, Sunday or Public Holiday; and
(d) to whom the Award applied in relation to their employment with the Respondent during the Relevant Period.
(the “Group” and a/the “Group Member/s”).
The insertion of ‘the Relevant Period’ potentially narrowed the group but it is true that the words added to §4(b)(ii) broadened the group. The other changes do not seem material to the number of persons in the group.
Insofar as the Second Further Amended Originating Application is concerned, it amended §4 so that it was in these terms:
4.
The ApplicantMs Pabalan brings these proceedings(1) for herself, and
(2) as the representative of a group constituted by all persons;
(a) employed by
the Respondent (“Coles”)at any time within theperiod of 6 years ending on the date of the filing of the Originating Application herein (the “Relevant Period”), and(b) who in the Relevant Period worked in a position:
(i) in a supermarket in the “general retail industry” within the meaning of that phrase in the
General Retail Industry Award 2010 (the“Award”),(ii) the title of which was, or the title of which included the word, “manager”, “Coles Services Team Leader” or “Coles Services Team Leader Area Support”
(a “Manager Position”), and(iii) which was undertaken as a “full time employee” or “part time employee” as those terms are defined in the Award;
(c) who
in any Pay Periodin the Relevant Period worked anrosteredhour (or part thereof); and(i) which was on a Monday to Friday on what was for the purposes of the Award an evening,(ii) outside the spread of hours from time to time prescribed in the Award for undertaking ordinary hours, or(iii) on a Saturday, Sunday or Public Holiday; and(d) to whom the Award applied in relation to their employment with the Respondent during the Relevant Period.
(the “Group” and a/the “Group Member/s”).Apart from accidentally deleting the definition of ‘the Relevant Period’, it is difficult to see that this augmented the group except to the extent that the words ‘part thereof’ in (c) potentially add something. However, I think it almost impossible to imagine that there was an employee who had only worked a partial hour but who had not also worked a complete hour.
Insofar as the Third Further Amended Originating Application is concerned, §4 is as follows:
4. Ms Pabalan brings these proceedings
(1) for herself, and
(2) as the representative of a group constituted by all persons;
(a) employed by Coles at any time within the Relevant Period, and
(b) who in the Relevant Period worked in a position:
(i) in a supermarket in the “general retail industry” within the meaning of that phrase in the Award,
(ii) the title of which was, or the title of which included the word, “manager”, “Coles Services Team Leader” or “Coles Services Team Leader Area Support”, and
(iii) which was undertaken as a “full time employee” or “part time employee” as those terms are defined in the Award;
(c) who in the Relevant Period worked an hour (or part thereof); and
(d) to whom the Award applied in relation to their employment with the Respondent during the Relevant Period.
This did not make any changes to the group definition and one can therefore be confident that there are no persons who were added to the group on 8 March 2022 to whom the six year cut-off date of 8 March 2016 could be apposite. The last part of §39C of the amended defence which raises this issue is therefore misconceived.
I.3 Should This Issue Be Decided?
There is a significant likelihood that the present debates may be purely hypothetical. I was not invited to try any of the group members claims and I had understood that only Ms Pabalan’s claims were to be tried. I accept that the parties did formulate Issue 37 which can only relate to the limitation issues concerning group members. However, I think it unwise to resolve these issues in the absence of being pointed to a person who is affected by the outcome. I am also concerned that insufficient attention may have been paid to Division 8.3 of the Rules.
CONCLUSIONS
These reasons are sufficient for the very large number of questions posed by the parties to be answered although in some cases the answer will be that the question does not arise. I do not think however that their efforts should be directed at answering those questions based on my reasoning. The parties’ conflicting lists of issues have been a distinct hindrance in this litigation and it were best if perhaps the Full Court were not troubled by them. Rather, the parties should now do what I have indicated at the start of these reasons which is to identify for each conclusion a person for whom that conclusion has a concrete effect. There need only be a single such effect, i.e., the fact may be as narrow as the overtime entitlement on a single shift.
Subject to the views of the parties, the course I would propose to take is that once one such person is identified for each issue I have resolved, I will make appropriate declarations in respect of that person and their relevant entitlement. I do not see that there can be any disagreement about facts of this kind. That being so, the parties should agree the terms of the declarations. Those declarations will then provide a clear platform for any appeals or cross-appeals.
There will of course be other issues about the future conduct of the proceedings. These can be discussed at a case management hearing on Monday 27 October 2025 at 9.30am.
I would make these final observations. The conduct of two regulatory actions which are partially representative in nature alongside similar but not identical class actions raises unique procedural challenges. Whilst I would not wish to definitive about how litigation of this kind might be handled in the future I am confident that they should not be handled the way these four cases were. What the parties in this case substantively wanted was the resolution of construction issues in the Award. There should never have been sample employees. The construction issues should have been identified in a single list and facts should have been agreed about actual employees which made those questions real. No attempt should have been made to move beyond the construction issues. Had that been done, the case would have been heard much faster and judgment delivered more quickly. Armed with what the Award meant, the parties could coherently have moved to questions of quantification. By permitting quantification into the picture, the proceedings became unacceptably complex. This should not be done again.
I certify that the preceding eight hundred and sixty-three (863) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram. Associate:
Dated: 5 September 2025
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