Workplace compliance has long been a cornerstone of good business practice, but the stakes are now higher than ever. Recent court decisions send a clear message: employers must get the basics right or risk legal, financial and reputational consequences.
This article outlines key risks and practical steps employers can take to stay compliant.
1 . Don’t assume your contracts will save you
Employers can use properly drafted set-off clauses in employment contracts to provide flexibility in meeting award conditions. But that flexibility is not without limits.
A recent decision involving Coles and Woolworths[1] illustrates that even carefully drafted set-off clauses may not be enough to protect against underpayment claims.
The court made clear that the contracts relied on by Coles and Woolworths did not allow them to average out award entitlements across pay periods; the salary must satisfy award entitlements in each pay period.
Based on this decision, employment contracts and payroll systems that average award entitlements over time are not compliant with the Fair Work Act. Employers must ensure employment contracts and payroll processes are aligned with the requirements to satisfy award obligations each pay period.
2. Record keeping is not optional, it’s your legal defence
The Coles and Woolworths decision confirmed that paying an ‘all-inclusive’ salary does not remove the requirement under the Fair Work Act to keep detailed records of hours worked, overtime, loadings or penalties. Rosters and informal clocking data relied on by the employers were held to be insufficient.
Where records are missing, the burden of proof shifts to the employer to disprove any underpayment claims.
3. Timing is not a technicality, it’s a legal requirement
Employers can be penalised not just for what they pay, but when they pay it.
In Jewell v Magnium[2] the employer was penalised $18,600 for failing to make termination payments on the employee’s final day, despite having paid all entitlements just 11 days after termination.
Courts have made clear that final pay (including unused leave and payment in lieu of notice) must be made on the employee’s last day of work.
In Wollermann v Fortrend Securities[3] the court held that once a performance-based bonus is earned, it becomes payable under the Fair Work Act and must be paid within the relevant pay period. Attempts to defer payment or forfeit payment upon resignation were found invalid.
Employers must ensure payroll systems can process termination payments on time and review bonus criteria to clearly define when entitlements become payable.
4. Flexibility doesn’t mean flexibility with compliance
As employees seek more flexibility to achieve a work-life balance, employers must ensure all compliance boxes are ticked.
In Naden v Catholic Schools Broken Bay[4], the Full Bench of Fair Work Commission overturned an employer’s refusal of a flexible work request because the employer failed to consider a procedural step under the Fair Work Act. Given this failure, whether there were reasonable grounds to refuse the request was irrelevant and the employer was required to implement the request.
Similarly, care has to be taken when making use of provisions that allow employers and employees to agree certain matters regarding the operation of award entitlements.
In the Coles and Woolworths proceedings, it was confirmed that award entitlements cannot be waived by informal or implied agreements, even for salaried or managerial staff. If you’re seeking to vary entitlements (where allowed), you need clear, informed consent, ideally in writing.
What employers should do now
Now is the time to:
- review employment contracts for enforceability and clarity
- audit payroll systems to ensure award entitlements are met on a pay period basis
- update policies and HR systems to reflect current obligations
- remediate any known underpayments quickly and transparently
The penalties for breaches of the Fair Work Act are significant and an intentional underpayment of wages or entitlements can now be a criminal offence. A compliance reset reduces legal risks, builds trust with employees and protects your brand.
Final thoughts: complexity is not a defence
The compliance landscape remains complex and in focus. As employees seek greater flexibility, employers face increased scrutiny and risk significant penalties - and ‘it’s too complex’ is simply not a viable excuse.
At Hall & Wilcox, we help clients navigate the complexity with tailored employment contracts, compliance reviews and practical solutions. If you’re unsure whether your workplace arrangements are compliant, now is the time to act.
Have concerns or need advice? Get in touch with Rosemary.
[1] Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092
[2] [2025] FedCFamC2G 676
[3] [2025] FCA 103 (the decision has been appealed)
[4] [2025] FWCFB 82
