In September 2025, the Federal Court handed down one of the most significant employment law decisions in Australian history. Woolworths and Coles now face a combined remediation bill of around $1 billion for having underpaid thousands of salaried staff over several years.
Ouch! Two of Australia’s largest employers, with dedicated payroll teams, legal counsel and significant compliance infrastructure, got award interpretation wrong. At scale. For years.
This isn’t a story about bad intent. It’s a story about how genuinely difficult Australia’s modern award system is to navigate, and how serious the consequences of getting it wrong have become.
What Actually Happened
Both Woolworths and Coles had employed staff under contracts that paid annualised salaries, without maintaining adequate records to ensure those salaries met or exceeded minimum entitlements under the General Retail Industry Award 2010.
The approach made intuitive sense. They have their own Enterprise Agreements anyway; pay Managers a salary above the award minimum, and that covers everything, right? The Federal Court said no.
The Court made clear that compliance needs to be monitored across every single pay period. Any set-offs can only be made within the same pay period, and entitlements must be satisfied in each pay period. Averaging across six months or a year, as Coles and Woolworths had been doing, wasn’t good enough. Even where employees were paid well above the award rate overall, that didn’t satisfy the legal obligation.
The result was $50 million in penalties for Woolworths alone, the largest ever imposed for underpayment in Australia, on top of an estimated $390 million in back payments.
MAdE Establishment: different scale, same problem
Woolworths isn’t alone in learning this lesson the hard way. In July 2019, the Fair Work Ombudsman entered into an enforceable undertaking with MAdE Establishment, George Calombaris’s hospitality group, which admitted to underpaying $7.83 million in wages to 515 current and former employees.
The underpayments resulted from MAdE incorrectly handling annualised salaries and failing to apply required award-rate payments for overtime, weekend, public holiday and casual work.
George said he was devastated and that it was an oversight, not deliberate. He self-reported, cooperated with the investigation and back-paid staff in full. He was ordered to pay a $200,000 contrition payment and fund external auditors across his venues. It’s also worth noting that as well as underpaying staff, MAdE also well overpaid many staff at the same time. The restaurant group isn’t operating anymore.
Very different businesses but the same underlying problem: award interpretation is hard, and the consequences of getting it wrong compound over time.
Why It’s So Difficult
There are three reasons businesses, large and small, consistently get this wrong.
Modern roles don’t fit old descriptions: Awards were written some time ago. Despite getting reviews, many modern job titles don’t appear anywhere in them. Businesses find the closest fit, make a call and move on. Two businesses making the same call in good faith can land in different places. Both can be wrong.
Language is genuinely subjective: Classification definitions use terms like “general supervision,” “exercise discretion” and “complex tasks.” What one manager considers complex, another considers entry-level. Subjectivity is baked in.
Annualised salaries create a false sense of security: The FWO v Coles and Woolworths case confirmed what many businesses didn’t realise: paying someone above the award rate in total doesn’t automatically mean you’ve met your obligations in each pay period. The details matter enormously, even with a well-drafted contract.
If you’re not sure, find out now
Employers who voluntarily self-report underpayments to the Fair Work Ombudsman can apply for a cooperation agreement, which provides protection from criminal prosecution. Getting ahead of it is always better than waiting for a complaint.
We’ve written more about the fundamentals of award classification and how to approach it here.
Because understanding why the system is hard is the first step to getting it right.
For businesses that want to get serious about award compliance, WorkSauce is a platform built specifically for this. Developed with deep expertise in operational award interpretation, it gives businesses the tools to understand their obligations, classify roles correctly and stay compliant as things change. You can find out more at worksauce.com.au.
At Zest People Solutions, we work alongside businesses to navigate the people challenges that matter. Award coverage and classification is one of them. Get in touch with the team to start the conversation and make sure your business is meeting its obligations.