A group of former employees at a chain of popular Sydney pubs has spoken out about large-scale underpayment that left them thousands of dollars out of pocket.

In August, Sydney pub empire the Reilly Group paid out more than $100,000 to 31 former workers who complained they had been underpaid — but not before disputing the amount owed, demanding the employees sign a confidentiality agreement, and sacking the worker who organised them.

Responding to questions from news.com.au, Reilly Group lawyer Dion Manca said the company “promptly investigated the complaint”.

Mr Manca said Reilly Group “appointed independent lawyers to audit its venues and the pay and conditions of all of its employees and former employees during their period of employment, updated each affected employee as to the progress of the review in writing and apologised to each affected employee in writing”.

“The misclassification of employment of the affected employees was an oversight and error, which arose due to a misinterpretation of the relevant Award conditions, which was swiftly investigated, reviewed (including professional independent review) and rectified,” he said.

Former employee Myf Nizette had been working at the Henson in Marrickville as a bottle shop attendant for a few weeks when she noticed she wasn’t being paid at the correct rate. She spoke to some co-workers, who realised they were also being underpaid.

“I brought it to the attention of management to little avail, except getting my own pay fixed. I figured that wasn’t good enough,” Ms Nizette said.

Under the hospitality award, wages are set according to the level of skill and responsibility the employee is assigned in their day-to-day work. Grade 1 covers low-skilled work such as collecting glasses and wiping down tables. More demanding work, like serving food or drinks, interacting with customers or handling money, is covered under Grades 2 and 3, which entitle the employee to a higher hourly wage and weekend penalty rates.

Jeremy* worked at the Henson for a year. Hired as a Grade 1 worker, he was quickly promoted to more intensive duties like mixing cocktails. Six months in, he was told verbally that he was being considered for a management position. In his time working at the Henson, he was never paid higher than a Grade 1 wage.

“I was doing well over 40 hours each week, some of that unpaid,” he said. “They dangled that promotion in front of me for six months, as an incentive to do extra stuff.”

Jeremy would end up being back-paid $3300 from one year’s worth of unpaid work.

“I could have desperately used that money,” he said.

Nissa* worked at the White Cockatoo in Petersham for six months, and at the Henson for several years. She received a payout of more than $6000.

“Because the Henson never had pokies, everyone assumed that the highest grade you could get there was a Grade 2,” she said. “I should have been on a Grade 3 the whole time I was there. I was in the cocktail bar, and I was getting paid Grade 1 wages.”

The workers decided to band together and ask the Reilly Group to review its payment of current and former employees, and pay back any money they believed they were owed. They say they were met with a hostile reception from management.

“One of the managers got wind that I had been talking to people about their pay rates. She sat me down and said it was none of my business what other people were being paid,” Ms Nizette said.

Reilly Group lawyer Dion Manca confirmed this.

“Management did advise one specific employee that it was inappropriate for her to be asking individual employees about their pay rates (as this was the private information of each employee) and directed that any employee who had a question about their pay rate was free to raise the matter directly with management,” Mr Manca said.

When several former employees submitted requests for pay slips, Reilly Group operations manager Luke Dryland sent an all-staff email denying anyone had been underpaid.

“Certain staff have been making accusations that casual employees are getting underpaid. This is not true,” Mr Dryland asserted in the email.

Two hours after that email was sent, Ms Nizette was let go from the Henson. While the termination letter she received from the Reilly Group asserted she was retrenched “as a result of requiring less staff in the bottle shop,” Ms Nizette believed the action was a result of her speaking out and organising the group of her colleagues. As she was employed as a casual for less than six months, she had no recourse to challenge her retrenchment.

“They had hired two other people in the bottle shop that fortnight. I was the longest-serving person in that section. They hired another person into my position very soon afterwards,” Ms Nizette said. “So the excuse that my position was being made redundant was utter bollocks, to be honest.”

The Reilly Group disputes Ms Nizette’s assertion that her position was filled shortly after she was let go, saying: “No casual bottle shop staff were hired shortly after the termination of Ms Nizette. No complaints, inquiries or allegations regarding the termination of Ms Nizette have ever been raised with the Reilly Group”.

In his all-staff email, Mr Dryland explained why workers were paid a Grade 1 wage.

“All employees under 3 months stay on level 1 as stated above as an introductory level while management spend time training,” Mr Dryland said. “When employees come on initially level 1 is (offered). This is what you sign up for. As time goes by and the employee, employer or staff member feels they are worth more … they get paid more.”

While the hospitality award has an “introductory level” of pay, it only applies to employees who have never worked in hospitality before, and who are being trained for Level 1 work. Workers must be paid according to the work they perform, regardless of how long they have been employed.

Mr Dryland also claimed that the Henson, in particular, was exempt from paying Grade 3 wages, as it does not have a pokies room.

“As the Henson is only a food and beverage operation and does not have a gaming revenue stream we need to controls (sic) costs,” he said.

Grade 3 of the award covers a range of activities besides supervising gaming rooms, including mixing cocktails, taking reservations and overseeing an in-house bottle shop.

In another email sent on July 4, Mr Dryland admitted mistakes regarding pay had been made.

“Following my last deputy post and further investigation into the hospitality industry award and the legalities behind it with the Australian Hotels Association and their legal department I realise some errors may have been made in the past,” he said. “Rest assure this we (sic) be rectified going forward and all employees past and present will receive correspondence from me directly.”

A day after this email, 31 current and former employees sent the Reilly Group a letter of demand. They alleged the company deliberately misclassified them as Grade 1 workers to avoid paying higher wages, said they had “been underpaid on a regular and systematic basis,” and demanded the value of their lost wages be calculated and paid back.

They also claimed managers would regularly ask bar staff to stay back after signing off to act as de facto security, rather than pay for dedicated security.

“The argument was that most of the front-bar staff were male, and about half the managers were female, so we were a deterrent,” Jeremy said. “They only had security on Fridays and Saturdays, and they would be out the door when the last customer left by about midnight. Every night you’d have to stay back. I lost a lot of hours from that.

“We were pressured to close up really quickly so we could clock off and save them money, while the managers would be downstairs doing work they had been too busy to do during the night — ordering, stock inventory, sending emails. They could be down there for an hour or more while we’re sitting upstairs, knowing that we can’t leave. You were stuck to their clock.”

Speaking for the Reilly Group, Mr Manca denied the practice was mandatory, but admitted that “a voluntary practice has been used at venues for safety reasons to encourage staff to leave in groups rather than individually, as there have been prior instances of staff leaving venues and being held up when outside and forced to re-enter and the venue has been robbed as a consequence”.

“No staff members have complained about (the) voluntary practice of staff leaving in groups at closing time,” Mr Manca said.

Initially, the Reilly Group calculated that it owed the workers $59,900. The employees disputed that figure, saying they were owed $102,796 that had been withheld over five years. In August, the Reilly Group conceded, and paid out the higher amount. Mr Manca described the original calculation as “erroneous”.

Mr Manca also said that “the discrepancies in pay resulting from the application of an incorrect employment classification were identified and all outstanding money due to affected employees was paid in full, plus an additional two per cent, within around two months of the complaints first being made known to the Reilly Group”.

During negotiations, Reilly Group lawyers asked the workers to sign a deed of release forbidding them from making “any statement or publication, whether oral or in writing,” that might “adversely affect (the company’s) reputation,” including speaking to media or posting on social media. The workers refused, arguing that the money owed them was theirs by right, and was not subject to conditions. The Reilly Group conceded.

In an area of Sydney associated with progressive politics, a working-class history and rapid gentrification, the Reilly Group has worked assiduously to present its venues as part of the community fabric. “Our philosophy at Reilly Group is to give back to the community that gives to us,” its website reads.

After buying the old Henson Park Hotel in 2013, company CEO Ray Reilly revamped the once-dingy beer barn into the Henson, now known throughout Sydney’s inner west for its family-friendly atmosphere, charity work and use of locally and ethically sourced produce. “Our focus is on quality, seasonality and sustainability. Supporting ethical and responsible practises,” the Henson’s website states.

It’s impossible to walk through the Henson without encountering the Reilly Group’s self-proclaimed ethos. “Marrickville matters: support those in need in our community,” reads the wall in the bottle shop. Besides craft beers from local brewers, cheese and meats from local producers and house-made gelato, you can purchase branded T-shirts that champion the Henson as “your trusty neighbourhood pub”. An artwork above the doorway to the kitchen boasts that the Henson serves “sustainable food for sustainable people”.

It’s worked. The back courtyard regularly overflows with young families, attracted by the pub’s dedicated parents’ room and kids’ playroom. During footy season, Saturday afternoons at the Henson before and after a Newtown Jets game at nearby Henson Park have become an inner west ritual. Mr Reilly himself is lauded by the Newtown Neighbourhood Centre as a “Newtopian Champion” for supporting anti-homelessness initiatives.

Having hit on a winning formula for attracting patrons who like feeling they’re doing good when they go to the local, the Reilly Group expanded. In 2016, the Group bought the West Village Hotel in Petersham, transforming it into the White Cockatoo, and the Sydney Park Hotel in Newtown. Mr Reilly has described the three pubs as his “golden triangle”.

Despite their experiences, many former employees still have some fond memories of the time they spent working at Reilly Group pubs. Staff took pride from the good work the pubs did in the community, their support for local charities and their friendly clientele.

“I always thought working at the Henson and the Cockatoo, I would be getting paid right,” Nissa said. “We worked hard, we had awesome relationships with the customers. But we were taken advantage of. We built them up. People deserve to know where they spend their money. In a community like Marrickville, they’re pretty big on that, and they’re all getting shafted.”

“They’re trading on this reputation that they’re for the inner west, and they don’t deserve that reputation,” Ms Nizette said.

“The Reilly Group would like to express the fact that it is a responsible and positive organisation,” the Group’s lawyer said. “The staff payment error was an isolated issue, promptly and satisfactorily addressed and any attempts to somehow leverage that error so as to paint a picture that Reilly Group operates venues that are unfair and unsafe for workers is completely false and inappropriate.”