Table of content
- Who Was Involved in the Wage Theft Case?
- What Payroll Practices Led to the Underpayments?
- When Did the Underpayments Occur and Court Rulings Begin?
- Where Did the Wage Theft Case Unfold?
- Why Did This Happen and What Went Wrong?
- How Did the Case Lead to a Billion-Dollar Liability?
- How Workstem Simplifies Payroll Compliance
- FAQs About Payroll Compliance
In September 2025, the Federal Court handed down a landmark ruling that exposed one of the largest cases of wage theft in Australian history. A major national retailer was found to have underpaid nearly 30,000 employees, triggering repayments already exceeding hundreds of millions of dollars. What started as small payroll errors grew into a billion-dollar liability, highlighting just how quickly compliance gaps can spiral out of control. Below is the case study of what businesses can learn from this, so let’s get right into it.
Who Was Involved in the Wage Theft Case?
A major national retailer and its workforce of around 30,000 salaried employees were at the center of this case. The affected staff ranged from store managers to senior team members, spread nationwide across multiple states. The Fair Work Ombudsman launched the investigation, and the matter was eventually decided in the Federal Court of Australia.
What Payroll Practices Led to the Underpayments?
The retailer relied on an annualised salary scheme, assuming that fixed lump-sum pay covered all entitlements, including overtime, penalty rates, and allowances. The Federal Court ruled this practice unlawful, finding that entitlements must be paid correctly in each pay period.
What started as small underpayments quickly escalated. By the September 2025 judgment, one retailer had already repaid about $330 million in back pay, another about $31 million, and both warned of hundreds of millions more still owed. The scandal is expected to exceed $1 billion in total liabilities.
When Did the Underpayments Occur and Court Rulings Begin?
The timeline shows how quickly these issues can escalate:
- 2021: The Fair Work Ombudsman began investigating the payroll scheme.
- 2023: A joint trial commenced in the Federal Court.
- September 2025: The Court confirmed the unlawful underpayments and record-keeping breaches.
- October 2025: A further hearing was scheduled to finalise repayments and penalties.
Where Did the Wage Theft Case Unfold?
The case was heard in the Federal Court of Australia, but its impact was nationwide. Employees across multiple states were affected, and because the dispute concerned the General Retail Industry Award, the judgment has sector-wide implications for all Australian retail employers.
Why Did This Happen and What Went Wrong?
The main issue was that the retailer failed to meet award obligations. Even though employees were given lump-sum annual salaries, the law requires each pay period to meet minimum entitlements under the award.
Key errors included:
- Assuming an annual salary could “set off” overtime and penalty rates.
- Failing to keep accurate time and payroll records.
- Breaching obligations under the Fair Work Act and modern awards.
The judgment serves as a wage theft warning to all employers: shortcuts in payroll, even unintentional, can lead to massive legal and financial consequences.
How Did the Case Lead to a Billion-Dollar Liability?
The case escalated through a regulator audit, investigation, and litigation. What began as a relatively small underpayment issue turned into a billion-dollar liability due to systemic payroll practices, inadequate record-keeping, and court enforcement.
For employers, the lesson is clear:
- Audit annualised salary arrangements.
- Maintain accurate clock-in and clock-out records.
- Correct any underpayments immediately.
- Use systems that ensure compliance with Fair Work and award rules.
How Workstem Simplifies Payroll Compliance
Simplify award interpretation and payroll processing with Workstem, the all-in-one workforce management & payroll software designed for every industry. Our system supports 122+ modern awards & 34 EAs, and keeps you up-to-date with changes in wage rates, penalty rates, and overtime rules.Workstem offers:
- Automated award interpretation
- Real-time wage calculations and timesheet syncing
- Employee self-service app for rosters and payslips
- Seamless integrations with Xero, NetSuite, and more
Choose from our Standard or Advanced plan to suit your business needs, and stay Fair Work compliant with confidence.
Book a free demo with our payroll experts and experience how Workstem can streamline your payroll and workforce operations.
FAQs About Payroll Compliance
Q1: What payroll error caused the underpayments?
A1: The retailer used an annualised salary scheme that failed to account for per-shift entitlements like overtime and penalty rates.
Q2: How many employees were affected?
A2: Nearly 30,000 employees were impacted nationwide.
Q3: What did the Federal Court decide?
A3: The Court ruled the annual salary scheme was unlawful, requiring full back-pay for each pay period and leaving the possibility of further penalties.
Q4: How much has been repaid so far?
A4: Hundreds of millions have already been repaid, with total liabilities expected to exceed $1 billion.
Q5: What should employers do to avoid similar risks?
A5: Employers should audit payroll processes, ensure annual salaries cover all entitlements, keep detailed records, and seek legal or software solutions for compliance.
