Recruitment cost extortion lands grocery stores in trouble

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Auckland, October 22, 2020

The Labour Inspectorate has reminded employers that charging workers for recruitment-related costs is illegal.

This follows a case brought to the Employment Relations Authority (ERA) by the Labour Inspectorate against four Christchurch grocery stores.

Metromart Limited, Grocery Guys Limited, JW&JG Limited (all trading as MetroMart), and Zesto Limited (trading as Zesto) were owned or managed by Mr James Godinet.

The businesses charged five of their employees for costs related to their employment, including the cost of listing online advertisements and administration fees for filling out Immigration New Zealand forms required for obtaining the workers’ visas.

Employment Premium illegal

Labour Inspectorate Regional Manager and Retail Sector Strategy Lead, Loua Ward said this equates to an employment premium and is illegal under the Wage Protection Act 1983.

“A premium can be a payment the employer charges the worker in exchange for a job offer, or it can be more subtle, such as employers trying to recoup recruitment-related costs or other business expenses such as theft by customers. Whether charged upfront or deducted from worker’s wages, these practices are illegal. Charging premiums disadvantages employees, particularly vulnerable migrants and young people, and undercuts businesses that are fronting these costs themselves,” she said.

The four businesses accepted that they committed breaches of employment standards.

The premiums have now been repaid to the five employees and the businesses changed their systems to ensure compliance. The ERA also ordered a penalty of $3000 – $500 to be paid to each employee, and $500 to the Crown.

Personal liability

Mr Godinet was made personally liable for the penalties.

“With the adverse effects of Covid-19 on business and employment, it is especially important for employers to understand their obligations to ensure a level playing field,” Ms Ward said.

More information about premiums and other deductions is available on the Employment New Zealand website.

Deductions: Businesses can also use the Employee Costs Calculator to work out their hiring costs.

Employee Costs Calculator – business.govt.nz(external link)

MBIE encourages anyone concerned about their employment situation, or that of someone they know, to call its contact centre on 0800-209020, where their concerns will be handled in a safe environment.

 

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