Supermarket giant Coles has been found to have seriously underpaid its workforce under a cosy deal it struck with the shop assistants union that cut penalty rates.
In a landmark Fair Work Commission decision, the tribunal found that some of the 77,000 workers at Coles would suffer potentially “significant” underpayment from the deal. The decision is expected to cost Coles tens of millions of dollars in higher wages.
The underpayment, first revealed by Fairfax Media in 2015, is estimated to affect tens of thousands of Coles workers, who were paid lower penalty rates and casual loadings than under the workplace award – the basic wages safety net.
The Fair Work Commission’s decision is a humiliating reverse for Coles and the conservative Shop, Distributive and allied Employees Association (SDA), the ALP’s largest union affiliate.
All workplace agreements are meant to pass the “better off overall test”, that employees are paid more than the award. The decision found this Coles agreement, the third largest in Australia, did not.
The tribunal has given Coles 10 days to provide undertakings it will pay extra to employees left worse off through working shifts with low penalties or by changing rosters. If it fails to do so the agreement will be ripped up.
It comes after Fairfax Media this month revealed that McDonald’s is also underpaying its Australian workers tens of millions of dollars a year under a deal struck with the SDA.
Some workers were paid nearly one-third less than the award, under a 2013 deal approved by the Fair Work Commission.
News of the underpayment comes at an uncomfortable time for Opposition Leader Bill Shorten and the ACTU, who have made the defence of penalty rates a key part of the election campaign.
The underpayment scandal at Coles was revealed nearly a year ago and based on work by Josh Cullinan, a senior official at the National Tertiary Education Union, who did the work in a personal capacity.
Mr Cullinan on Tuesday said the tribunal’s most significant finding was that the agreement should never have passed the “better off overall test”.
“Make no mistake; if the Coles deal did not pass the [test] then the agreements for Woolworths, the Super Retail Group, Bunnings, McDonalds … they are all likely not to pass,” he said.
“Over the next little while, we will have to see some sort of analysis of these agreements to find out how they came to be made.”
Mr Cullinan’s research on Coles found some low-paid workers were as much as $3,500 a year worse off than the award. Last year Mr Cullinan, backed by the meatworkers’ union, challenged the deal at the Fair Work Commission.
As a result, Coles was forced to provide undertakings to lift casual penalty rates from 20 to 25 per cent and pay young workers more. Now it has also been told to pay higher penalty rates.
Coles trolley operator and appellant in the case Duncan Hart said the tribunal ruling was “as clear a victory as we could have hoped for”.
He said that while a win for Coles workers, the decision also cast a cloud over similar agreement across the retail and fast food sector, struck by the SDA, including Australia’s other largest employers, Woolworths and McDonalds.
“This is a repudiation of the SDA’s cosy deals with bosses,” Mr Hart said.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.