Labor leader Bill Shorten faces his biggest test yet before the trade union royal commission with claims he oversaw an employment deal that lowered wages for hundreds of mushroom pickers in return for unusual payments to the union he led at the time.

The allegations come as his former union colleague and factional ally Victorian Labor MP Cesar Melhem, faces fresh allegations he used an industry-bankrolled slush fund to buy his way to political power. The fund, known as "Industry 2020", was first revealed by Fairfax Media in December, 2012.

Opposition leader Bill Shorten. Credit:Alex Ellinghausen

During a day of testimony potentially troubling to Mr Shorten, the royal commission probed the Australian Workers Union's deal with Victorian mushroom grower Chiquita Mushrooms in the early 2000s, when Mr Shorten was union secretary.

Questions were raised about $4000-a-month payments the union received over six months in return for what the union claimed was for health and safety training.