Coles claims no workers will suffer a reduction in their base rate of pay as a result of the move. But the company has not addressed the commission's main concern - tens of thousands of workers being paid penalty rates significantly lower than the workplace award, the basic wages safety net. Last week the full bench of Fair Work found the Coles deal failed the better off overall test (BOOT), intended to ensure workers are paid more under workplace agreements than the award. It found some workers were "significantly" worse off under the deal, first revealed by Fairfax Media in 2015. Part time and casual workers, who make up 80 per cent of the Coles workforce, were especially hard hit. The tribunal gave Coles 10 days to provide undertakings to either compensate employees left worse off by working shifts with low penalties, or to overhaul rosters. It warned if it did not do so, the agreement will be ripped up.

In a statement, Coles said the changes were "impractical" and would "significantly reduce the level of service we can provide our customers." Coles said it would hold "listening sessions" with workers to help decide what to do next. The shop assistants' union on Thursday said it was "extremely disappointed" at the company's refusal to make the undertakings put forward by the workplace umpire. Union national secretary Gerard Dwyer said that by taking up the recommendations, the company would have been "acting in the best interests of its workforce". As a result of Coles' decision, Mr Dwyer said the union had now approached management to begin negotiations for a new enterprise agreement that would ensure workers were better off than the award.

Fairfax Media revealed the underpayment scandal at Coles a year ago, based on work by Josh Cullinan, a senior official at the National Tertiary Education Union, who did the research in a personal capacity. Mr Cullinan's research on Coles found some low-paid workers were as much as $3500 a year worse off than the award. Mr Cullinan said Coles failure to agree to Fair Work's proposed undertaking underscored how much money it would cost them to pay higher penalty rates to many of its 77,000 workers. "It's an explosive admission of the scale of the underpayment by Coles; if it was only a small cohort of workers it would be nothing to give an undertaking," he said. "It is clearly in the order of $100 million a year."

In what looms as a test of the Australia's industrial relations system, it now appears certain there will be further legal action to ensure workers are paid higher rates. Mr Cullinan said it was inevitable there would be a new Fair Work application to have the old Coles agreement terminated. That could result in workers being covered by the retail award which pays much higher penalty rates. "If I go to Coles on a Sunday every worker would be better off on the award. I think everyone of those workers would be better off," Mr Cullinan said. Last year Mr Cullinan, backed by the meatworkers' union, challenged the deal at the Fair Work Commission. As a result, Coles was forced to provide undertakings to lift casual loadings from 20 to 25 per cent and pay young workers more. That was appealed further by Coles trolley worker Duncan Hart and others, which resulted in last week's landmark decision. On Thursday Mr Hart described the Coles move as a "slap in the face" to "all its workers and the Fair Work Commission".

"Nonetheless it is still an important victory because these agreements have been found to not pass the better off overall test. It is not a legal agreement under the Fair Work Act. Last month Fairfax Media also revealed McDonald's is underpaying its Australian workers tens of millions of dollars a year under a deal struck with the SDA. Some McDonald's workers were paid nearly one-third less than the award, under a 2013 deal approved by the Fair Work Commission.