Settlement rejected in underpayments action against Woolworths

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This was a class action seeking to recover salary underpayments to employees of Woolworths supermarkets or Big W stores.

The applicants applied for approval of a settlement and discontinuance of the proceeding pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth). However, Murphy J informed the parties that he would not approve the application and the applicants subsequently withdrew it. In this judgment, his Honour published his reasons for making orders by consent dismissing the application.

His Honour found that in the circumstances of the case, the appropriate test was whether the proposed settlement and discontinuance was fair and reasonable in the interests of the class members to be bound by it, including as between class members. His Honour found that the settlement failed that test for several reasons, including the following.

First, his Honour rejected the parties’ submission that the discontinuance was in the interests of class members because they would be able to obtain redress through a proceeding brought by the Fair Work Ombudsman in relation to broadly similar alleged salary underpayments (FWO Proceeding) at no cost, whereas in the class action they would incur costs. His Honour said that there were real advantages for class members having the class action to vindicate their asserted rights. For example, not all class members are represented by the FWO Proceeding, the class action alleges two further contraventions not pleaded in the FWO Proceeding, and there is a possibility that any pecuniary penalties imposed in the FWO Proceeding would be less than those that may be imposed in the class action.

Second, his Honour found that the discontinuance would give rise to a number of real disadvantages for class members, including that:

• the limitation period applicable to class members’ claims would begin to run from the date of the discontinuance, and the rights of class members to bring their underpayment claims in another proceeding would be progressively eroded from that date. Notwithstanding this, the settlement deed did not contain clauses to ensure class members’ claims would not be eroded by the operation of that limitation period. For example, it would have been straightforward for the parties to include a clause to the effect that Woolworths would not rely on a limitations defence in a subsequent proceeding, but they did not do so; 

• under the settlement deed, class members were not permitted to bring or participate in another class action unless the FWO Proceeding is discontinued; and

• there was no guarantee or evidence to the effect that the FWO Proceeding would not be discontinued, or that it would result in a favourable outcome for the class members covered by it.

Third, his Honour observed that, under the proposed discontinuance, the applicants’ solicitors (Adero Law) would be paid $1.75 million for legal costs, and the two applicants would receive reimbursement payments of $17,500 and $7,500 respectively, but class members would receive no compensation. In circumstances where the discontinuance would result in class members receiving no material benefit on the one hand, and Adero Law receiving payment of its legal costs, his Honour said that, in his view, “a potential conflict of interest, and a conflict of interest and duty has arisen” (at [66]) because it was in Adero Law’s interests for the proceeding to come to an end while it was in class members’ interests for it to remain on foot.

In light of the above, his Honour made orders by consent dismissing the application for discontinuance and settlement.

Baker v Woolworths Group Ltd (No 2) [2022] FCA 534

Federal Court of Australia, Murphy J,
11 May 2022

Applicants’ Solicitors: Adero Law
Respondents’ Solicitors: Ashurst
Applicants’ Funder: N/A

Austlii Link: Available here

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