Coles/ Woolworths Store Managers Decision - Key Takeaways for Employers

On 5 September 2025, the Federal Court delivered its long-awaited judgment on key preliminary questions of law in the long running Coles & Woolworths store managers underpayments litigation (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 109).

The proceedings relate to approximately 40,000 Coles and Woolworths store managers and department managers who allege they have been underpaid. These managers were employed on annualised 'all-in' contracts which stated their annual salary provided for all entitlements they would be entitled to under the Retail Award, including allowances, penalty rates and overtime.

The basis of the store managers' underpayment claim is that whilst they received relatively high 'all in' annualised salaries, they alleged they had worked so much overtime that they were paid less than what they were entitled to paid be under the Retail Award.

In response, Coles and Woolworths made three key arguments:

1.  The store managers did not work as much overtime as they alleged; or

2.  Coles and Woolworths never asked the store managers work all the alleged overtime; or

3.  If the store managers salaries and hours are averaged out across a 6 month period, they have been paid more than they were entitled to under the Retail Award.

Critically, however, as Coles and Woolworths did not believe they were required to due to the nature of the 'all-in' annualised salaries, they did not keep records of all hours actually worked by the store managers (rather, only rosters were kept). Nor did Coles and Woolworths keep records of all entitlements owing to these employees under the Award.

The Court held in response to these three key arguments:

1. Due to the reverse onus of proof under s557C of the Fair Work Act 2009 (Cth), the onus was on Coles and Woolworths to disprove the employees worked the alleged additional / overtime hours and, without any records of actual hours worked, Coles and Woolworths were unable to do so.

2. The employment contracts effectively authorised all overtime in advance; and

3. Employers can only 'set off' contractual payments against Award entitlements within a pay period - not across a longer period (such as 6 months).

Key Takeaways for Employers

1. Sett Off and Annualised Salaries

Annualised salaries can only set off Award entitlements within each pay period.

Any above-Award payments (e.g. pursuant to an annualised salary) made in a past or future pay period cannot discharge Award entitlement arising in the current pay period - regardless of the wording of any set off clause in an employment contract. 

This is a significant clarification by the Court as to the interaction between annualised salaries and Award entitlements. 

2. Authorisation of Overtime

Where an employment contract states that additional hours may be necessary to perform an employee's duties and an employee then works additional hours to perform their duties, those additional hours are deemed to be authorised overtime (regardless of an absence of express permission on each occasion). 

These 'reasonable additional hours' clauses are common in employment contracts providing for annualised salaries. 

3. Record Keeping for Overtime

The payment of an annualised salary / 'all inclusive' remuneration does not eliminate the requirement for an employer to keep a record of all entitlements an employee is entitlement to be paid under an Award or enterprise agreement (e.g. any incentive-based payment, bonus, loading, penalty rate or other monetary allowance). Rather, the payment of an annualised salary merely discharges the payment of those entitlements. 

Further, it is not sufficient to keep records that entitlements could be deduced from (e.g. for overtime, rosters + clocking data). Rather, the record keeping requirements require the entitlements to be recorded in a manner which is 'readily available' to be inspected and understood by employees. 

4. Reverse Onus (s557C)

Where an employer has not kept the requisite entitlement records (as above), s557C of the Fair Work Act 2009 operates to reverse the onus of proof such that the employer must then 𝘥𝘪𝘴𝘱𝘳𝘰𝘷𝘦 an employee worked the alleged hours (e.g. additional overtime hours). 

In this respect, his Honour Perram J noted "Coles failed to operate an overtime system for these employees, and s 557C makes the ensuing evidentiary vacuum a calamity which belongs to Coles and not its employees." 

The judgment contained a significant number of further findings including many useful clarifications in respect of the specific wording and operation of the Retail Award. 

It is noted that as at the date of writing (8 September 2025), this decision is still subject to appeal. 

Full judgment see here: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2025/2025fca1092