Fair Work takes Super Retail Group to court alleging $1m in staff underpayments

Australia’s Fair Work Ombudsman (FWO) has commenced legal action in the Federal Court against Super Retail Group (ASX: SUL) and its four subsidiaries, alleging the company underpaid workers by more than $1 million.

Fair Work alleged some breaches of the Fair Work Act were ‘serious contraventions’, leading to legal action against SRG Limited and subsidiaries Super Cheap Auto, Rebel Sport, SRG Leisure (trading as BCF and Ray’s Outdoors) and Macpac.

The allegations and legal action follow a FWO investigation, commenced after Super Retail Group disclosed widespread underpayments of thousands of employees to the Ombudsman and the Australian Securities Exchange.

According to FWO, the Federal Court proceedings will focus on a sample of 146 of the allegedly underpaid employees across the group. It is alleged that the employees were underpaid a total of approximately $1.14 million for their work between January 2017 and March 2019.

The FWO said that most of the underpayments were the result of Super Retail Group’s subsidiaries paying salaried employees annual salaries that failed to cover their minimum lawful entitlements, given they generally performed ‘significant amounts of overtime work’.

In addition, it was alleged that the methodology used by Super Retail Group in its remediation program resulted in only partial back-payment of the sample employees.

Fair Work Ombudsman Sandra Parker said keeping large corporate sector employers accountable for any underpayments remained a priority.

“The breaches alleged in this case – inadequate annual salaries for employees stretching across multiple years – have become a persistent issue for businesses across many industries,” said Parker.

“Every employer should be clear that if annual salaries do not cover all minimum lawful entitlements for all hours actually worked, the results can be substantial back-payment bills, plus the risk of significant court-ordered penalties. Penalties can also be higher for serious contraventions.

“This is also the first court action where the Fair Work Ombudsman has alleged breaches by a holding company for contraventions by its subsidiaries. Holding companies who allegedly knew or reasonably should have known of underpayments within their group will be held to account,”

Of the 146 employees from across the country, the FWO alleged that some were underpaid just ‘small amounts’ but that others were owed as much as $34,500.

As such, the FWO is seeking penalties against the parent company and each of the four subsidiaries. Maximum penalties for the alleged ‘serious’ contraventions can be as high as $630,000 per breach - ten-times the penalties which would ordinarily apply.

In response, Super Retail Group issued a statement acknowledging the proceedings and noting it had undertaken a ‘comprehensive back payment program’ for those affected.

“The remediation process has been substantially completed, with Super Retail Group having back paid more than $57.2 million in entitlements and interest to both current and former team members,” SUL said.

The company’s managing director and CEO Anthony Heraghty apologised to affected team members, noting the company will review the proceedings and engage with the Ombudsman.

“We note the allegations in the proceedings and reiterate our view that this matter represents a regrettable chapter in our company’s history. It is unacceptable and contrary to the company’s values for any team member not to be paid correctly,” Heraghty said.

“We are sorry for the impact on our team members and today we restate our unreserved apology to each person affected. Since 2018 we have changed our processes to fix the issues and help to ensure team members are being paid correctly.

“We have effectively completed our detailed remediation process to back pay affected team members and have fully cooperated with the Fair Work Ombudsman's investigation.”

The news comes just four days after Super Retail Group revealed its December half financial results, detailing double-digit sales growth for its brands Supercheap Auto, rebel and Macpac, and notching $2 billion in revenue for the period.

Shares in SUL are down 0.08 per cent to $12.55 per share at 11.55am AEDT.