Merivale says it may have to review whether its current business model is viable after being ordered to pay staff at award rates.

The Fair Work Commission has terminated Merivale’s expired enterprise agreement, which allowed the hospitality giant to pay some workers below the award.

The so-called “zombie agreement” was made in 2007 during the Work Choices era.

Merivale – headed by pub tsar Justin Hemmes – currently owns more than 70 pubs, hotels, restaurants and venues in Sydney, including The Ivy, The Establishment, Coogee Pavilion, The Newport, Palmer & Co and The Beresford.

From March, the company will be required to offer current rates and conditions.

The ruling is the result of action taken by the United Voice union on behalf of two casuals who complained they were underpaid by thousands of dollars a year.

According to United Voice one employee was paid $6 an hour less than the award on Saturdays, $10 an hour less on Sundays and $25 an hour less on public holidays. Another employee was paid a total $3100 below the award, equivalent to 22% of his salary.

Merivale’s group human resources manager Kate Tones said in a submission that the company may have to consider reclassifying some of its employees as a result.

Tones said that 71% of the company’s workfers were casuals and 48% worked on some form of visa.

“Merivale will need to consider the viability of business practices which while viable under the EBA, may not be viable under the modern award,” she said.

Tones argued that paying casual overtime would be a significant problem, as would the award’s requirement of mandatory 30-minute unpaid meal breaks for shifts five hours or longer.

United Voice national secretary Joanne Schofield said: “The outdated industrial conditions in the Merivale agreement preyed on vulnerable young workers, paying them sub-award rates.

“It’s only right that Merivale has agreed to adopt the provisions of the hospitality award and pay employees what they should be earning under current award rates – and we remain disappointed that it took the threat of legal action to do so.”

In a statement, Merivale said “given the differences between the operation of the two systems, and the functional adaptations required by this transition, there will be a number of administrative and operational changes for Merivale and its staff”.

“Merivale will continue to deliver exceptional product and service across all of its venues and will remain a workplace of choice for our staff.”

Merivale faces possible class action

Law firm Adero is investigating legal action against Merivale for underpaying workers.

Adero principal Rory Markham told The Australian Financial Review the firm’s three months of due diligence on Merivale had indicated “potential systemic underpayments of employees since 2013”.

“We have received a surprisingly high level of interest from Merivale employees expressing their frustration with low, flat rates of pay while working predominantly on nights, weekends and public holidays,” Markham said.

The AFR notes: “Adero is understood to be alleging Merivale only increased casuals’ base rates to the award level of an introductory hospitality employee, a classification that only runs for three months, instead of the level 1 classification with 25% casual loading.

“Adero’s potential lawsuit is understood to raise complex and largely untested legal issues over rates owed in expired agreements made before the Fair Work Act.”

A Merivale spokeswoman said claims of illegal underpayments were “absolutely incorrect” and that even its lowest base rate was higher than the award’s first three classifications.

“Given the absence of any underpayment, the only winners out of any proposed class action, as always, will be lawyers and litigation funds,” she said.

She suggested employees to contact Merivale “where any queries can be dealt with confidentially and within a guaranteed 14 days”.

No annual staff party

According to News Corp, Merivale Group has been accused of punishing its workers by cancelling the annual staff party, “seemingly in retaliation for a forced wage increase”.

A worker said the event was due to take place in about three weeks’ time, as it has every year since at least 2013. But at a staff meeting held on Monday, the day the Fair Work ruling was handed down ,”it was announced the event was not proceeding”.

A spokesperson for Merivale denied that a staff event had been cancelled and insisted there had been a “misunderstanding” on the part of staff who spokes to news.com.au.

“Previously, we have held two staff events throughout the year — a staff party in January (or) February and The Merivales (staff awards) in August,” the spokesperson said.

“We now have individual Christmas celebrations, as the venues do anyway and always have, multiple functions throughout the year and the always-anticipated big end of financial year celebration party, The Merivales.”