What Employers Must Learn from Australia’s Largest Underpayment Case

Despite new laws making wage theft a criminal offence from 1 January 2025, some of Australia’s largest corporations continue to underpay their staff. The recent Federal Court case highlights that even the country’s largest retailers have failed to meet basic compliance obligations. Check out our previous article on criminalizing wage theft

Brief Background

The case involved underpayment claims against two major supermarket retail giants covering thousands of salaried store managers and department heads. Both companies had placed employees on annualised salaries without properly reconciling those payments against the entitlements owed under the General Retail Industry Award 2010. This meant penalty rates, overtime, and allowances were frequently overlooked. While both entities had paid huge amounts in remediation, the Court still found systemic breaches that went beyond payroll errors, pointing instead to ongoing failures in compliance systems and governance.

Why did the Court impose penalties?

Invalid set-off clauses – The contracts attempted to average payments over six-month periods, but the law requires entitlements to be met in each pay cycle. This meant employees were effectively underpaid in busy periods and could not legally be “compensated” later when workloads eased.

Poor record-keeping – Without accurate records of hours worked, the companies could not demonstrate compliance. This was a breach of the Fair Work Act and highlighted how even large corporations with systems in place can fail if they neglect basic record-keeping obligations.

Key Takeaways for Employers

· Annual salaries don’t replace award compliance; reconciliation must be done every pay period.

· Keep precise, accessible records of hours and entitlements.

· Underpayments now carry criminal risk, not just financial exposure.

To avoid being imposed significant penalties by the Court for underpayments, it is important that employers regularly review their payroll compliance framework. This review extends to revisiting remediations that are currently in process or have been paid.

This article is general in nature and is not legal advice. If you need help dealing with underpayments, or another employment law matter, or require assistance with updating your workplace contracts, procedures and policies, Voice Lawyers can assist you.

We help people navigate the complexities of the Fair Work Act and workplace laws with confident, practical advice. You can contact us at office@voicelawyers.com or give us a call at 02 9261 1954 or use the link on our website to book a consultation to speak with one of our lawyers.