Woolworths admits to underpaying staff by $1.24m, could face a hefty fine

Woolworths has admitted underpaying over 1,200 staff from 2018 to 2023.  (ABC News)

A week of bad publicity for Woolworths just got worse.

On Tuesday, its outgoing CEO Brad Banducci was threatened with jail time for refusing to answer questions in a Senate inquiry examining supermarket price gouging.

Today, the company admitted in a Melbourne court that it short-changed at least 1,235 former Victorian employees by not properly paying their long service leave entitlements.

Woolworths conceded $1.24 million of underpayments occurred between November 2018 and January 2023.

In some instances, staff were only owed a few hundred dollars. In the worst cases, it was up to $12,000.

The Melbourne Magistrates’ Court was told the Woolworths Group and related company Woolstar breached Victoria’s Long Service Leave Act on 1,227 occasions.

Woolworths’ barrister Saul Holt KC said the company discovered the discrepancies during an audit of its IT systems, prompting it to self-report to Victoria’s Wage Inspectorate.

“That’s just the right thing to do,” Mr Holt said.

Because of the technicalities of the breaches, Woolworths is facing a theoretical maximum fine that could exceed $10.25 billion.

Such an extraordinary penalty — which would be crippling even for a corporate giant that recorded a net profit of $1.62 billion last financial year — is not realistically on the cards.

In court, lawyers agreed there was no ceiling on the fine magistrate Nahrain Warda could impose in this case, although financial penalties in Victorian magistrates courts are usually capped at about $480,000.

The magistrate reserved her decision until Wednesday, April 24.

On top of the incoming fine, Wage Inspectorate of Victoria barrister Kathleen Crennan called for Woolworths to be convicted.

“There’s really no excuse for this to have happened in the first place,” she said of the underpayments.

Two days ago, Woolworths boss Banducci was accused of peddling “spin” and “bullshit” by Greens senator Nick McKim during a public inquiry, which delved into the profits of big retailers and rising prices at checkouts.

Mr Holt told the court it was “an interesting week to be talking about Woolworths”, and insisted the company was “much more than just some headlines and a Senate inquiry”.

He said the company was an “exemplary employer” that was founded in 1924, and provided work to more than 200,000 staff, who are referred to internally as “team members”.

The Woolworths barrister said the company apologised to its team members and had gone to great lengths to track down former staff affected by the underpayments, to ensure they received their dues and additional interest and superannuation.

In 2019, the company admitted it had underpaid 5,700 salaried staff as much as $300 million, many of whom were department managers across its retail stores.

The Fair Work Ombudsman and class action litigants are also taking on Woolworths and Coles in the Federal Court over claims of mass underpayments.