Ashley Weston, 32, is charged with threatening to kill that employee during an incident on June 15, 2020, along with unlawful assault with a weapon and possessing both an imitation firearm and a folding knife.
The court heard Mr Weston had acted in a "highly erratic" and "verbally abusive" manner and pointed the fake gun at the employee multiple times, allegedly stating "I'm going to f****** kill you".
Police prosecutor Sergeant Jo Allen said the victim, a former military member who identified the gun as a .22 calibre handgun, believed the accused would have killed him "if he had the means".
Sgt Allen said the employee heard the trigger of the weapon click when he walked past, and said Mr Weston continued pointing a pocket knife once he had left the store and the doors had been locked.
But defence solicitor Lawrence Waugh, in indicating his client's intention to contest the threat to kill charge, said Mr Weston had a "significantly different" account of the interaction, arguing the employee had reacted in an aggressive manner to a "near-collision".
He said the accused felt harassed by the employee, having not done anything to antagonise him, and noted the employee followed him when he attempted to walk away, allegedly continuing to move towards Mr Weston shouting "out, out".
Regarding the threat to kill charge, Mr Waugh said the accused was not holding the imitation weapon like a gun, that it was "so small it was unlikely anyone would take it for a real weapon", and Mr Weston had denied threatening the employee at all.
Mr Waugh said his client said "don't f****** come at me" as the employee moved towards him, and Mr Weston turned and walked away, calling the employee a "cooked c***".
But Magistrate Ian Watkins said the accused "has got his challenges ahead of him", pointing to the employee's military background as making him of a position to identify a firearm.
“To point something that looks like a firearm in a moment of anger, I'm struggling to see how the charge is not made out,” he said.
Mr Waugh told the court his instructions were the employee had "overreacted dramatically" and said the military background might make him "well equipped" to identify a weapon but it could also create a "paranoia".
The court also heard about an incident from June 5, 2020, at Warrnambool Coles, where Mr Weston threw a plastic bag of frozen meals at a customer.
Mr Weston pleaded guilty to that charge.
He is also charged with a corrections order breach.
The matter was adjourned until February 5, with Mr Weston to be assessed by Corrections Victoria and a mental health worker.