Justin Hemmes’s hospitality group Merivale is facing a potential class action from workers who are alleging underpayment. It comes after the company’s enterprise agreement (EA) was terminated by the Fair Work Commission earlier this week. It ordered Merivale to transition from its expired EA to industry-standard awards by March 5.

Law firm Adero has told the Australian Financial Review it is accepting registrations from current and former Merivale employees who wish to claim back wages they believe have been underpaid.

The firm alleges the company has been underpaying employees since 2013, which is when its Workchoices-era EA expired. Rather than drawing up a new contract after it expired, it maintained the EA, which meant staff continued to be employed under those conditions. The lawful 2007 agreement meant Merivale wasn’t required to pay overtime or full penalty rates to staff.

Merivale, which runs more than 70 venues in Sydney, told Broadsheet it denies the allegations of a lawsuit and underpayment and is confident staff has been paid in full. The company says it was audited by the Fair Work Ombudsman in 2018, which found it was in full compliance with its legal obligations. “Merivale also continually undertakes internal audits and is confident that there is no systemic underpayment,” a spokesperson said.

Adero principal lawyer Rory Markham told Australian Hotelier, an online news service for Australia’s beer, wine, spirits and hospitality industries, “That means in basic terms [Merivale] found a way to pay staff a certain amount of money that was below the current minimum rates of pay, as we see it.”

He says that while the agreement that existed prior to 2009 was lawful then, if made in the current day it would be significantly below minimum rates and would be prohibited. “We’re dealing with what they would call a ‘zombie agreement’.

“Our cause of action is really saying that when the [industrial relations] system came into existence post 2009, there was an obligation to ensure people were paid minimum rates of pay and that Merivale has failed to keep those rates of pay up to minimum standards,” Markham says.

While only 50 employees have so far registered, Markham anticipates between 3500 and 5000 people will come forward. He argues Merivale, which is worth more than $1 billion, gained an advantage over its competitors due to the underpayments.

The Merivale spokesperson said, “The type of claim ventilated in media reports is not about systemic underpayments, but rather is based on a creative, novel and strained interpretation of the industrial instrument, which is contrary to the Fair Work Ombudsman’s interpretation.”

It urges any current or ex employees to contact Merivale directly with questions or concerns, saying “the only winners out of any proposed class action, as always, will be lawyers and litigation funds.

“A proposed class action is speculative and could involve current and former employees in a long, drawn out and expensive legal action which could take years.”

The Merivale spokesperson also says the queries can be dealt with confidentially and within a guaranteed 14 days.

Markham believes this allegation of underpayment is not a one-off case. “There are a large number of operators that have similar practices to Merivale,” he told Australian Hotelier. “We’ll be expecting announcements in the next three-month cycle of other operators.”