What the United Workers Union v Coles case means for your payroll practices

Is your payroll system set up correctly for an employee to take only one day of long service leave?

The Fair Work Commission (FWC) has ruled that Coles Group Supply Chain Pty Ltd (Coles) unlawfully calculated long service leave payments by basing them on a seven-day week instead of a five-day working week. In the decision of United Workers Union v Coles Group Supply Chain Pty Ltd [2025] FWC 1370, the FWC acknowledged that the definition of “ordinary working day” can be debated, especially for those employees with irregular rosters.

Here, our experts break down the details of this case, explain long-service leave entitlements, and discuss the implications for payroll practices in every business.

United Workers Union v Coles Group Supply Chain Pty Ltd: what happened?

The matter arose from a dispute involving a worker at Coles chilled distribution centre who discovered he was paid for only 5.36 hours instead of 7.5 hours, when he took a single day of long service leave.

Coles argued that under the Long Service Leave Act 1955 (NSW) (Long Service Leave Act), it was entitled to pay employees one-seventh of their weekly wage for each day of long service leave taken. In internal communication, Coles said it altered its long service leave calculations to better align with the Long Service Leave Act, which it claims is framed around calendar days and weeks rather than traditional (five-day) working weeks. This meant that instead of being paid based on daily working hours, employees were paid a fraction of their weekly pay when taking a single day of long service leave.

The United Workers Union (UWU), representing the affected employee, rejected this interpretation. It argued that taking a “day” of long service leave should mean taking a working day, not a calendar day, and that employees are entitled to be paid their usual daily hours, not just one-seventh of their weekly earnings. The UWU escalated the dispute to the FWC, requesting that the FWC determine the method for calculating a single day of long service leave.

The FWC determined that the Long Service Leave Act doesn’t support the view that a single day of long service leave should be paid as one-seventh of a weekly wage. It clarified that although long service leave accrual is based on years of continuous service, the payment for long service leave taken by an employee must be aligned with the employee’s ordinary pay. The FWC emphasised that past amendments to the legislation, particularly in 2020 and 2022, were made to address scenarios where single days of leave could be taken, making it necessary to distinguish between calendar and working weeks in calculations.

Commissioner Damian Sloan of the FWC criticised the calculation approach taken by Coles, opining that it was unfair and resulted in inconsistent outcomes. Employees on fixed schedules were paid less than their ordinary daily earnings when taking a single day of long service leave, unlike those with variable hours, whose pay was based on averages.

Commissioner Sloan agreed in part with the UWU’s interpretation that a “day” refers to a working day, particularly for employees with irregular rosters. Still, he noted that the Long Service Leave Act leaves some room for debate depending on the employee’s work pattern. Ultimately, he pointed to the Long Service Leave Act’s definition of “ordinary pay” as the most reliable guide for determining long service leave pay entitlements.

While the FWC acknowledged that Coles has valid operational reasons for seeking a uniform system for long service leave management, it didn’t excuse its non-compliance with its obligations.

Coles has stated it is reviewing the decision, and the UWU hasn’t yet publicly commented.

Part of a broader trend

This decision comes at a time of increased scrutiny on employer payroll compliance and penalties arising from underpayments and wages. The Fair Work Ombudsman (FWO) and Courts have identified that system errors aren’t an excuse for underpayments, this is especially for organisations with considerable resources.

Compliance errors can happen to any employer, regardless of size or industry

Over the past year alone, we’ve seen major employers – including Woolworths, the Commonwealth Bank, and Coles – forced to address significant long service leave underpayments. Coles, notably, has come under scrutiny twice. These non-compliance issues have typically resulted from payroll system errors or the incorrect exclusion of employee entitlements, including allowances and bonuses, from calculations of ordinary pay. This non-compliance unsurprisingly draws widespread media attention.

Avoiding these costly errors starts with compliance and regular audits

To avoid similar pitfalls, businesses must ensure their payroll systems are subject to regular compliance reviews and updates. This is especially important in the current climate of frequent workplace law reforms.

Employers should also closely monitor changes to long service leave legislation, which varies significantly across states and territories. Ensuring payroll configurations are up-to-date and accurate, and based on a sound understanding of long service leave legislation, is key to avoiding underpayment risks.

Given the pace of legislative updates and heightened scrutiny surrounding pay accuracy, organisations must adopt a proactive and flexible approach to payroll compliance. A static system or outdated process leaves businesses vulnerable to both financial penalties and reputational harm.

To navigate these complexities, employers should invest in comprehensive payroll training for HR and payroll staff, stay informed about legislative changes, and consider implementing a payroll compliance audit, which can offer a pathway to demonstrate genuine compliance efforts.

If any of this information has raised any questions about your payroll and compliance obligations for your business, or if you have another workplace matter with which you need assistance, please reach out to the Citation Legal team for a confidential discussion.

About our authors

Brittany Byrne is a Partner and Solicitor at Citation Legal and is based in our Brisbane office. Brittany is a leading expert in providing workplace business solutions to employers in an array of industries. Using her common-sense approach to disputes and litigious matters, she has allowed her clients to achieve commercial outcomes while protecting their reputations in the marketplace.

Samantha Shariev is an Associate at Citation Legal. She regularly advises and supports our clients with a wide range of workplace and employment issues.