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Coles has narrowly avoided a multi-million-dollar penalty after the Wage Inspectorate Victoria uncovered and charged the supermarket giant with long service leave underpayments effecting thousands of employees.

wage inspectorate Victoria uncovers $700,000 in unpaid long service leave entitlements  

In 2020, the Wage Inspectorate Victoria launched an investigation into Coles following a complaint made by a former employee who did not receive their accrued long service leave entitlement when their employment ceased.

The investigation discovered that more than 4000 employees had been underpaid almost $700,000 in long service leave entitlements.

Coles described the underpayment as an ‘error’. A clause in the relevant enterprise agreement stated that long service leave accruals would be ‘frozen’ during periods of unpaid leave and sick/carer’s leave. This clause was in contradiction to the obligations of employers under section 13 of the Long Service Leave Act 2018 (Vic), which requires employees to take into account periods of unpaid leave when calculating the length of an employee’s continuous employment for the purposes of establishing long service leave entitlements.

This resulted in Coles incorrectly calculating long service leave entitlements and underpaying accrued entitlements.

coles pleads guilty to all seven charges

The Wage Inspectorate commenced proceedings against Coles, laying seven charges based on the underpayment of a sample of 24 former employees, totalling $53,710 in accrued long service leave entitlements.

Coles pleaded guilty to all seven charges, attributing the underpayment to mere error and apologising to the former employees affected.

Magistrate Justin Foster described the underpayment as a “systematic failure”. He condemned the lack of proper auditing processes and the failure on the part of such a well-resourced company to keep their documentation in line with legislative updates.

outcome following early guilty plea

The Wage Inspectorate bundled the 24 claims into 7 charges, pleaded as ‘non-continuing offences’, but when before the Court, Magistrate Foster deemed the offences as ‘continuing’. A continuing offence would usually attract a maximum of $9,913 (60 penalty units) per day and could have exposed Coles to a penalty of many millions of dollars.

However, as it was pleaded (and notwithstanding that the underpayments affected over 4,000 employees), the penalty was limited to a maximum penalty of $60,390. Taking into account a discount for an early guilty plea, Magistrate Foster ultimately ordered the penalty of a fine of $50,000 and made a costs order of $15,000 against Coles.

lessons learned: aligning practices with legislation

These proceedings demonstrate the significant traps in misinterpreting and/or failing to correctly apply the technical aspects of long service leave legislation, and the significant penalties that can apply, particularly with continuing contraventions.

Employers are reminded to ensure that:

  • their employment agreements and policies are up to date with current legislation, including the Long Service Leave Act 2018 (Vic);
  • the current legislation is being applied correctly in practice.

If you would like assistance with either of the above, please contact our Employment, Safety and Migration Team.

stay up to date with our news & insights

coles narrowly avoids millions in fines after long service leave underpayment

26 July 2021
stella gehrckens natalie montalto

Coles has narrowly avoided a multi-million-dollar penalty after the Wage Inspectorate Victoria uncovered and charged the supermarket giant with long service leave underpayments effecting thousands of employees.

wage inspectorate Victoria uncovers $700,000 in unpaid long service leave entitlements  

In 2020, the Wage Inspectorate Victoria launched an investigation into Coles following a complaint made by a former employee who did not receive their accrued long service leave entitlement when their employment ceased.

The investigation discovered that more than 4000 employees had been underpaid almost $700,000 in long service leave entitlements.

Coles described the underpayment as an ‘error’. A clause in the relevant enterprise agreement stated that long service leave accruals would be ‘frozen’ during periods of unpaid leave and sick/carer’s leave. This clause was in contradiction to the obligations of employers under section 13 of the Long Service Leave Act 2018 (Vic), which requires employees to take into account periods of unpaid leave when calculating the length of an employee’s continuous employment for the purposes of establishing long service leave entitlements.

This resulted in Coles incorrectly calculating long service leave entitlements and underpaying accrued entitlements.

coles pleads guilty to all seven charges

The Wage Inspectorate commenced proceedings against Coles, laying seven charges based on the underpayment of a sample of 24 former employees, totalling $53,710 in accrued long service leave entitlements.

Coles pleaded guilty to all seven charges, attributing the underpayment to mere error and apologising to the former employees affected.

Magistrate Justin Foster described the underpayment as a “systematic failure”. He condemned the lack of proper auditing processes and the failure on the part of such a well-resourced company to keep their documentation in line with legislative updates.

outcome following early guilty plea

The Wage Inspectorate bundled the 24 claims into 7 charges, pleaded as ‘non-continuing offences’, but when before the Court, Magistrate Foster deemed the offences as ‘continuing’. A continuing offence would usually attract a maximum of $9,913 (60 penalty units) per day and could have exposed Coles to a penalty of many millions of dollars.

However, as it was pleaded (and notwithstanding that the underpayments affected over 4,000 employees), the penalty was limited to a maximum penalty of $60,390. Taking into account a discount for an early guilty plea, Magistrate Foster ultimately ordered the penalty of a fine of $50,000 and made a costs order of $15,000 against Coles.

lessons learned: aligning practices with legislation

These proceedings demonstrate the significant traps in misinterpreting and/or failing to correctly apply the technical aspects of long service leave legislation, and the significant penalties that can apply, particularly with continuing contraventions.

Employers are reminded to ensure that:

  • their employment agreements and policies are up to date with current legislation, including the Long Service Leave Act 2018 (Vic);
  • the current legislation is being applied correctly in practice.

If you would like assistance with either of the above, please contact our Employment, Safety and Migration Team.