Young charity workers were forced to lick underwear, cross dress and take part in obscene cigarette rituals, according to lawyers suing the marketing giant Appco.

Key points: The allegations form part of an $85m class action against Appco

The allegations form part of an $85m class action against Appco More than 500 former workers have come forward since the class action was filed

More than 500 former workers have come forward since the class action was filed Appco says it is investigating all the claims

The shocking allegations are the latest to emerge as part of an $85 million class action against the Appco Group in the Federal Court of Australia.

The Appco Group is one of the world's biggest fundraising agencies and rattles the tin on behalf of some of Australia's best known charities, including Surf Life Saving Australia and The Starlight Foundation.

But its workers, sometimes known as "charity muggers" or "chuggers", claim they were overworked, grossly underpaid and bullied.

Lawyer Rory Markham told the ABC more than 500 former workers had come forward since he filed the class action against the Appco Group last month.

Mr Markham said some alleged that they were forced to cross dress, take part in "cockfights" and lick underpants if they did not meet their daily sales targets.

Workers in Tasmania also allege they were forced to participate in an obscene ritual involving cigarettes.

Tyrone Corbett worked for Appco subsidiary QMG Marketing in Hobart.

Tyrone Corbett says he witnessed disturbing workplace punishments. ( Supplied )

"Our jobs involved going out and selling raffle tickets and pins. At the end of the day we were getting 10 per cent commission on that, so if we sold $500 worth of pins, which would have been a good day, we'd only come away with about 50 bucks," Mr Corbett said.

"So after a week's work, generally we'd come away with $200, if that, and that was for a good, solid, long week's work."

But it was not just the long hours and low pay that troubled Mr Corbett. On road trips he said he witnessed disturbing rituals designed to punish workers who did not meet their sales targets.

"The first road trip was my very first week working there. That was quite a scary experience simply from the behaviour that happened there," Mr Corbett said.

"The very first day of this week-long road trip from Hobart to Launceston the leaders had a meeting and they discussed what sort of punishment should be involved for anyone who didn't hit their daily target.

"Later that evening we all got back into the accommodation … I saw a group of people huddling around one of these leaders who did not hit their targets.

"As it turned out, the punishment for not hitting their target was to shove a cigarette up your bottom, pull it out and then smoke it."

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Mr Corbett said one young man was forced to do it every day. He said another ritual involved forcing underperforming sales staff to lick underpants.

"The guy licked around and then he went out and threw up. I was disgusted," he said.

"I did try not to be a part of it, but still seeing it happen and doing nothing is unacceptable on my behalf even though I had no authority there."

Bullying, humiliation occurred across Australia, lawyers allege

Rory Markham from Chamberlains Law Firm said hundreds of people had contacted his firm to join the case, which alleges Appco engaged in "sham contracting".

"Of the 200 that have been verified, their documents suggest that on average they worked for eight months or longer in Appco and that their underpayment was about $52,000 per year."

Mr Markham said they had also received reports of bullying and ritual humiliation spanning offices in Brisbane, Canberra, Sydney, Melbourne, Perth and Adelaide.

"In Sydney we've had reported instances of individuals having to dress in female clothes and having to dance in front of 60 to 80 people at a time," he said.

"One of the other common features is the report of a cockfight in which two people need to get on the ground have their hands behind their back and fight back and forth with each other until one falls over.

"It's a classic form of ritual or initiation or other practices that one wouldn't think existed in the current day, but these individuals have reported it and been quite scarred by the practice."

In a statement, the Appco Group said it had "nothing to hide" and that it was investigating all of the claims. It denied the rituals were widespread or systemic.

Appco also said the alleged behaviour was "outrageous and completely unacceptable".

"These specific allegations relate to two marketing companies that have closed in the past two years," it said.

"Therefore Appco Australia may be limited in our ability to investigate."

But Appco said it would terminate contracts with any marketing company found to have tolerated such behaviour.

In a separate statement, Appco chief executive Martin Gaffney said it would vigorously defend the class action, which he described as "flimsy" and lacking in foundation.