The Woolworths Group Ltd (ASX: WOW) share price is down on news of legal action because of its wages underpayment issues.
What’s going on?
According to reporting by the Australian Financial Review, the Fair Work Ombudsman has launched legal action against Woolworths for underpaying salaried managers. The total backpay amount could now increase to beyond $400 million.
The AFR reported that the regulator is seeking around $713,000 of outstanding backpayments to 70 in-store salaried managers underpaid $1.17 million from 2018 to 2019. It also wants Woolworths to adopt its methodology for calculating all other underpayments of salaried managers.
In the FY21 half-year result, Woolworths said that it had made further progress on salaried team member remediation with $228 million paid in the half.
The AFR said that whilst Woolworths had reached a total cost of $390 million for the remediation, some managers and class action lawyers alleged that Woolworths wasn’t looking at actual hours worked, with some estimates pinning its real backpay bill at $620 million.
Today’s news is that the Fair Work Ombudsman is now making a similar argument with how Woolworths has applied overtime penalties like weekend and public holiday penalty rates, meal allowances and annual leave loading.
The FWO also alleges that Woolworths “failed to make or keep records which specified the overtime hours the salaried managers worked or detailed the loadings, penalty rates or allowances application for those hours.”
The underpayments allegedly range from $289 to $85,905 during the 12-month timeframe.
FWO’s Sandra Parker said: “This court action highlights that large employers face serious consequences if they do not prioritise workplace law compliance among other aspects of their business.”
Is the Woolworths share price an opportunity?
Woolworths shares are currently valued at around 28 times the estimated earnings for the 2021 financial year, according to CommSec. I think that’s pretty pricey for a business that is only going to be growing earnings by single digits over the next few years.
There are other ASX dividend shares that might be worthy options to think about.
