Coles has been accused of underpaying more than 7,800 employees a total of $115 million by the Fair Work Ombudsman (FWO).

The FWO has begun legal proceedings against the supermarket giant in the Federal Court.

It claims the alleged underpayments occurred between 1 January 2017 and 31 March 2020.

The alleged underpaid Coles employees were working in regional and metropolitan areas across every state and territory.

Most were responsible for managing a department or function within a Coles supermarket, such as bakery, customer service, delicatessen, dry goods, fresh produce, meat and night-fill.

Employees worked an extra hour every shift without payment

The FWO alleges most of the underpayments were the result of Coles paying its salaried employees annual salaries that were insufficient to cover their minimum lawful entitlements, given the employees generally performed "significant amounts of overtime work."

The FWO alleges Coles’ salaried managers were generally contracted and rostered to work 40 hours per week, but often worked more hours.

It alleges the salaried managers worked an average of approximately one hour per shift on top of their rostered hours, during that three-year period.

The FWO also alleges that weekend and public holiday penalty rates, allowances and a range of other entitlements were also underpaid.

The alleged underpayment of these salaried managers ranges from small amounts to $471,647 and it is alleged that 45 of them were underpaid more than $100,000.

It is also alleged that Coles breached record-keeping laws under the Fair Work Act by failing to keep proper records, including some records relating to overtime worked.

Some underpayments revealed in 2020

The development comes after Coles Group Limited disclosed to the FWO and the Australian Securities Exchange in early 2020 that it was reviewing the pay of award-covered, salaried employees in its liquor and supermarket businesses.

At the time, Coles said it had underpaid staff in its supermarket and liquor stores and it was setting aside $20 million to pay back employees.

However, the FWO says Coles's remediation program has "significantly underestimated" amounts owed to employees.

Following its own investigation, the FWO alleges Coles has underpaid 7,812 employees a total of $115.2 million.

It alleges more than $108 million remains outstanding from Coles's remediation program.

It is alleged that most of the underpayments relate to overtime entitlements under the General Retail Industry Award 2010.

A directions hearing in the Federal Court in Sydney is still to be scheduled.

In a statement to the stock exchange on Thursday, Coles said it was reviewing the proceedings filed by the FWO.

It said the issues related to the "interpretation and applications of various provisions of the General Retail Industry Award" and if further remediation was required, it would update the market accordingly.

Wage 'underpayments' have become widespread across Australia

Sandra Parker, Fair Work Ombudsman, said underpayments resulting from insufficient annual salaries for employees covered by awards had become a persistent issue among businesses of all sizes, across a number of different industries.

"Businesses paying annual salaries cannot take a 'set-and-forget' approach to paying their workers," Ms Parker said.

"Employers must ensure wages being paid are sufficient to cover all minimum lawful entitlements for the hours their employees are actually working and the work they are actually doing."

Ms Parker said it was a priority for the FWO to see large employers undertake remediation programs "correctly" after underpayments had been discovered.

"This court action against Coles should serve as a warning to all employers that they can face serious consequences if they do not prioritise workplace law compliance," Ms Parker said.