On 5 September 2025, the Federal Court of Australia delivered a significant decision in proceedings against Coles and Woolworths concerning alleged underpayments of over 27,000 salaried store managers. The judgment provides important clarification on key employer obligations under the Fair Work Act 2009 (FW Act) and the Fair Work Regulations 2009 (FW Regulations).
The Court ruled that contractual salary ‘set-off’ arrangements can only discharge minimum payment obligations within a single pay period — not between pay periods. This has major implications for employers who rely on annualised salary arrangements to meet minimum award or enterprise agreement entitlements.
The decision arose from four consolidated proceedings: two regulatory actions brought by the Fair Work Ombudsman, and two class actions by affected employees. All four cases centred on the same issue: Coles and Woolworths had engaged employees under annualised salary contracts without accurately tracking entitlements under the General Retail Industry Award 2010 (GRI Award).
Although both Coles and Woolworths conceded they had not paid employees in accordance with the minimum entitlements under the GRI Award, they disputed the interpretation of the GRI Award and employment contracts, and, consequently, the amount of compensation owed.
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