Ok I am jumping on the bandwagon and talking about the Coles and Woolies FWA case. Mostly since it is topical it might help some of you small business people understand some core FWA principles.
In September 2025, the Federal Court handed down a landmark decision in a case brought by the Fair Work Ombudsman (FWO) (together with class actions) against Woolworths and Coles. Read more here
The core dispute: "Annualised salaries + set-offs" under modern awards
FWA has always told us that the Award is the MINIMUM payroll requirement. You don’t need to follow the Award IF you can show the way you pay employees is over and above Award rates and conditions.
Coles and Woolies: argued managers’ salaries averaged more than the Award rates/conditions.
FWA: said records didn’t clearly show this pay-to-pay, and the Court agreed with FWA.
What the Federal Court decided
- Set-off across pay periods is not permitted. Employers can’t offset underpayments in one pay with overpayments in another. Each pay period must meet Award conditions.
- Annualised salaries don’t replace Award obligations. Salaries must still cover entitlements every pay cycle.
- Record-keeping failures were significant. Without detailed records, FWA assumes underpayment.
- Agreements must be genuine. Employees must fully understand variations to Award entitlements.
- Remediation doesn’t erase liability. Paying back wages after the fact doesn’t avoid penalties.
Why this matters for small and medium businesses
This ruling doesn’t just hit the supermarkets – it has serious implications for any business that:
- Employs staff under modern awards or enterprise agreements
- Uses annualised/fixed salaries where overtime/penalties might apply
- Relies on set-off clauses
- Has minimal HR/payroll capacity
- Has weak record-keeping systems
Cheat sheet for small businesses
| What to do | Why | Quick action steps |
|---|---|---|
| Review salary + set-off clauses | They may be invalid | Get contracts reviewed/redrafted |
| Check each pay period | Entitlements must be met | Reconcile every cycle |
| Improve record-keeping | Weak records = automatic non-compliance | Track actual hours, penalties, allowances |
| Upgrade payroll/HR tech | To automate compliance | Adopt modern software or outsource |
| Audit past pay periods | Identify gaps and avoid penalties | Spot-check, remediate if needed |
| Train staff/management | To reduce mistakes | Educate on award obligations |
| Get expert advice | Reduce legal risk | Engage HR/legal or outsource to a BAS Agent |
Final thoughts
The Coles/Woolies case is huge, but the principles apply to all businesses. An Award is the bare minimum, and compliance must be precise, transparent, and defensible. Is yours?
