Some of Australia’s best-known charities are urgently demanding explanations and are considering cutting ties with fundraising giant Appco, as young donation-collectors claim they were exploited, underpaid and bullied.

A large class action lawsuit looms in the Federal Court against marketing company Appco to attempt to recover up to $80 million for up to 8000 former workers who rattled collection tins and sold merchandise in public places on behalf of major charities.

A group of former Appco workers have mobilised to join a class action, alleging sham contracting, underpayment and humiliating rituals.

They are alleging they were illegally classified by Appco as contractors instead of as employees, and some claim their overall wages were as little as $2.50 an hour.

It is also alleged that employees were subjected to bullying when they raised questions about their workplace rights. ‘We regularly review our relationship with Appco and will be doing so again.’ a CanTeen spokeswoman said.

Many of the nation’s biggest charities use Appco as a third-party fundraiser, but several organisations are now reviewing their contracts in light of the allegations.

CanTeen, a charity supporting young Australians with cancer, held a meeting with Appco’s Australian chief executive “as a matter of urgency” on Monday, the first business day after the claims were reported.

“We are very concerned by the allegations raised and are taking them extremely seriously,” a spokeswoman said.

CanTeen said Appco had assured its representatives that it was investigating the specific allegations and reviewing its practices. CanTeen has requested daily updates from Appco, and is reviewing its relationship with the company. Jacob Bywater won the Appco Group’s “top sales performer award” in 2015. He is the lead litigant in a class action against the group.  Photo: Steven Siewert

“As with any supplier, we regularly review our relationship with Appco and will be doing so again as we gain a more thorough understanding of the situation in the coming days and weeks,” the spokeswoman said.

Fairfax Media has confirmed that other Australian charities have begun reviewing their contractual arrangements in light of the troubling claims. A number of charities have sought urgent explanations and clarifications from Appco. Those who don’t hit target risk being placed in a “sluggie race”.  Photo: Supplied

“The alleged employment practices are unacceptable,” a spokeswoman for youth homelessness charity Ladder said.

“We have raised the issue with the agency that manages the third-party relationship with Appco.”

Children’s charity The Alannah & Madeline Foundation said it expected that its partners “abide by the law in all respects”.

“The Foundation expects all employees and independent contractors to be paid properly, especially young people,” a spokesman said.

Appco said it was yet to be officially advised of the class action, but rejected allegations of “sham contracting”.

Central to the legal action is the argument that fundraising workers – sometimes referred to as “charity muggers” or “chuggers” – were in fact employees of Appco, not independent contractors, and should have been paid accordingly.

“Appco is committed to operating a responsible independent contractor model and strongly disputes the claims around employment made in the media,” Appco said.

The case also includes claims of ritualistic humiliation of young Appco fundraising workers. Former staff claim that “underperformers” were made to dress up like chickens and fight each other. Others said they had to slither on the floor in a “sluggie race” in front of their colleagues..

“The bullying allegations raised in the media have not been reported to Appco, but it absolutely does not condone the activities described,” the company’s statement said.

Other major Appco clients – the Starlight Children’s Foundation and Camp Quality – declined to comment to Fairfax Media.