Woolworths (ASX:WOW) share price gains amid class action settlement

Woolworths seems to have put a 2-year-long legal battle to bed

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The Woolworths Group Ltd (ASX: WOW) share price is gaining this morning after the company settled a class-action lawsuit brought about by its employees.

A class action against Woolworths was filed to the Federal Court of Australia in 2019 after the supermarket found it had underpaid around 5,700 employees.

Today, the retail giant announced it has provisionally settled the class action. The company has also agreed to pay a $2,500 ex-gratia payment plus superannuation to around 20,000 current and former employees.

At the time of writing, the Woolworths share price is $39.86, 0.4% higher than its previous close.

That's roughly in line with the broader market's movements. Right now, the S&P/ASX 200 Index (ASX: XJO) and the All Ordinaries Index (ASX: XAO) have gained 0.16% and 0.21% respectively.

Let's take a closer look at today's non-price-sensitive news from Woolworths.

A quick refresher

Woolworths has been battling against the now-settled class action for nearly 2 years. In October 2019 a review found Woolworths had underpaid some of its salaried employees.

Around a month later, employees filed a class action lawsuit against the company to the Federal Court of Australia.

Woolworths has since repaid what was owed to affected employees, including interest and superannuation. The remediation payments have pulled around $370 million from Woolworths' coffers so far.

However, the company believes the underpayments began in 2010. That's beyond the time period the supermarket keeps records of rosters. Therefore, it's unclear as to whether employees were underpaid between 2010 and 2013.

Today's news

The Woolworths share price is up amid news the company has settled a class-action lawsuit brought against it.

Additionally, Woolworths has agreed to provide around $50 million worth of ex-gratia payments to previously underpaid employees.

Unfortunately for Woolworths, it no longer has records of employee rosters from between 2010 and 2013. That means the company can't verify if employees were indeed underpaid during that time.

However, the underpayments likely stem from the 2010 implementation of the modern General Retail Industry Award.

As a result, the company will provide every employee who was potentially affected by the underpayments from 2010 until 2013 with a $2,500 payment, plus superannuation.

Woolworths' CEO Brad Banducci commented on the news released today:

We said at the outset that we would extend our review beyond our legal obligations and look back to 2010. With detailed analysis challenging in the earlier years, we felt an equal and broad-based payment to all potentially impacted team members was a fair and equitable way to approach remediation for this period.

Woolworths share price snapshot

Today's gains for the Woolworths share price have added to its already strong performance.

The company's share price has gained 17% since the start of 2021. It is also 24% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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