Cannot charge employee to work for you

Would you pay $15,000 to buy yourself a job? That was what an employee was required to do in a case heard by the Employment Tribunal recently.

Precious of France Company ("the company") manufactured high fashion garments. Its owners were Iranian and advertised in an Iranian newspaper for a machinist. Kheirali Barmaki applied for the job. To secure the position, the company required him to pay a premium equivalent to $NZ 15,000. Mr Barmaki loaned this money and paid it to the company.

He was then required to sign a three-year employment contract that provided, amongst other things, that:

He would be paid a flat hourly rate of $7.50 per hour, 8 hours per day, 40 hours per week.
He would be entitled to 2 weeks annual leave.
The company would provide him with accommodation.
His passport would be held in the company's safe for the duration of the contract.
He would pay a $NZ 10,000 penalty if he terminated the contract before the three years was up.

After Mr Barmaki arrived in New Zealand, the company accommodated him and another employee in two rooms at its factory. The company then demanded $25 per fortnight rent to compensate for the extra insurance premium that it had to pay because he lived on the premises. This was despite having agreed in its employment contract to provide him with accommodation.

The company also deducted tax from Mr Barmaki's wages despite having assured him prior to coming to New Zealand that it would pay this. Mr Barmaki complained about this. The company accepted that there had been a misunderstanding and eventually agreed to forgive Mr Barmaki $7500 of his debt.

The company suffered a downturn in work and began requiring Mr Barmaki to finish work early. It reduced his pay proportionally. As a result, Mr Barmaki was unable to meet his loan repayments.

Mr Barmaki became increasingly desperate and unhappy. He ended up having a heated argument with one of the company's owners and was dismissed.

He later filed an arrears of ages claim with the Employment Tribunal against the company relating to its failure to provide him with 40 hours work per week and pay him holiday pay, its deduction of tax from his pay, and its charging of rent for his accommodation.

Except for the deduction of tax, the Tribunal upheld Mr Barmaki's claim.

In deciding the case, the Tribunal noted that Mr Barmaki's employment contract was illegal in a number of respects, and expressed concern that it had passed through the immigration and work permit process as acceptable.

In particular:

The Wages Protection Act prohibits an employer from charging an employee a premium for employment.
The Holidays Act provides that employees are entitled to a minimum of three weeks annual leave per year, not two weeks as provided for in Mr Barmaki's employment contract.
The company had no lawful right to retain Mr Barmaki's passport.
The payment of a $10,000 penalty for terminating the contract early was harsh and oppressive, particularly when the term of the contract was three years and Mr Barmaki only had a work permit for one year.

As regards the paying of the $15,000 premium, the Tribunal was highly critical of the company

"While it is understandable that people such as [Mr Barmaki], who are desperate to start a new life for themselves in a new country, might well be induced to pay for that opportunity, it is unfortunate indeed that the [company], who themselves had that opportunity, should seek to profit from the desperation of their fellow countrymen" it said.

The Employment Tribunal also questioned why the New Zealand Immigration Service had issued work permits for foreign machinists when there were a number of local machinists who had been made redundant during the contraction of the clothing industry.

This case illustrates the importance to employees of having laws that provide for minimum employment rights. Without such laws, employees are open to exploitation by unscrupulous employers.

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