Supermarket giant Coles has defied the Fair Work Commission and refused to boost penalty rates for workers who have been left worse off under a controversial wage agreement struck with the shop assistant's union.

Key points: Coles said the undertakings were "impractical" for its customer service model

Coles said the undertakings were "impractical" for its customer service model It says employees will now revert to the previous agreement

It says employees will now revert to the previous agreement Critics say Coles has shown its contempt for its workers

The decision means that employees who work mostly at nights and on weekends will continue to be paid less than they would be under the conditions of the award, which is the basic safety net for retail workers.

The agreement raised base hourly rates of pay, but cut penalty rates, dividing the Coles workforce between those who work predominantly during the day on week days, and those who rely on penalty rates.

The Fair Work Commission last week found that some of the 77,000 Coles workers covered by the agreement would be left out of pocket, and asked Coles to lift penalty rates.

By law, any agreement must pass the better off overall test (BOOT), which stipulates no worker can be left worse off than under the award.

The agreement between Coles and the Shop Distributive and Allied Employees Association (SDA) was originally waved through by the commission last year.

But the process ground to a halt after a part-time Coles employee from Queensland, Duncan Hart, claimed it would leave substantial numbers of workers worse off.

Coles and the union argued that the wage shortfall for those who relied on penalty rates would be made up for by an array of benefits contained within the agreement, including blood donor leave, natural disaster leave, domestic violence leave and Defence Force leave.

However, the commission rejected this argument.

Pay deals to revert to previous agreement

In a press release, Coles said the 77,000 workers would now revert to the previous agreement, dating back to 2011, but that it would continue to pay the higher hourly rates contained within the disputed agreement, to ensure no Coles worker's pay would be suddenly cut.

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They will also receive a pay rise contained within the agreement next month.

"Coles sought to participate constructively in the Fair Work Commission's deliberations. While we respect the decision of the commission, the undertakings proposed were impractical for our customer service model," the statement said.

However, Mr Hart said the company had shown its contempt for its workers by refusing to agree to the commission's request.

"Coles has basically spat in the face of every worker by refusing to ensure that no worker earns less than they would do under the award," he said.

"While it's good that the agreement has been quashed because it was not good enough to pass the BOOT, this also points to the fact that the only thing that will defend workers' rights now is a strong union, as the commission doesn't even have the power to force Coles to pay the penalty rates mandated by the award."

Mr Hart said he was unsure what the next step in the battle against Coles and the union would be, but he was now entitled to make an application to have the Coles workers shifted to the conditions of the award.

Union 'disappointed' with Coles decision

Despite the fact the union and Coles had been in lock-step throughout the process, the union's national secretary, Gerard Dwyer, on Thursday afternoon said he was "extremely disappointed" that Coles had refused the commission's request.

"The SDA urged Coles to make undertakings and it is the SDA's view that by doing so the company would have been acting in the best interests of its workforce," Mr Dwyer said.

"As a result of [Thursday's] decision, the SDA has now approached Coles to recommence negotiations for a new enterprise agreement that will meet the Fair Work Commission's BOOT as now applied."

Mr Dwyer said the union maintained its position that the original agreement it negotiated with Coles left the vast majority of the Coles workforce better off, despite that commission's ruling that it did not pass the test.