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Workers who pay to work

Date: 08/11/2017

It seems pretty simple that the wage – work bargain means that an employer pays an employee to provide services for them. Unfortunately, there are some employers who do not appear to understand this straight forward transaction.

One such employer is Educasia Media Limited, the owner of a small Hamilton newspaper called the Asia Pacific Times, which demanded a $50,000 premium from a prospective employee, Huizi Shu, in return for a job.

Shu agreed to pay the money which she obtained from her parents in China. The money was then used by the Company to cover Shu’s wages.  This effectively meant that Shu was paying herself to work for Educasia.

A year into the employment relationship, Shu resigned and asked for the premium to be refunded. The company refused and said it was only prepared to pay Shu $17,000 if she could find another employer to pay a premium for her.

Educasia’s actions came to the attention of the Labour Inspectorate which pursued a number of claims against the Company in the Employment Relations Authority.

It should come as no surprise to learn that Educasia’s requirement that Shu pay a $50,000 premium was found to be unlawful. And as all of the wages received by Shu came out of that premium, the Authority also concluded that Shu had not been paid the minimum wage or holiday pay by the Company.

The Authority also found that a number of other employees of Educasia had not been paid correctly.

All told, Educasia was ordered to pay $54,000 in penalties, $37,149.99 in backpay ($27,766.80 of which was to Shu) and to repay the $50,000 premium. It was also banned from sponsoring new visas to recruit migrant labour for two years.

This case is one of the more extreme examples of an employer exploiting a vulnerable worker. The graveness with which Educasia’s conduct was regarded was clearly reflected in the level of the penalties ordered.

Sadly, situations where employers seek to extract premiums from employees in return for employment are far too common. And with the number of labour inspectors expected to swell under the new Government, it is likely that cases of this nature will continue to be exposed over the next few years.

While cases involving vulnerable or migrant workers tend to attract a lot of attention, they are not the only situations where employers have sought to extract unlawful premiums.

One such case involved LJS Employment Limited, which operated a fish and chip shop, and its employee, Janine Matthews.

Matthews was not required to pay anything to the company to get her job. However, her employment agreement with LJS provided that if she left employment within two months, she would be required to repay one week’s ordinary pay as a reimbursement towards training costs.

The employment relationship between Matthews and LJS lasted for just over a month due to her resigning. In reliance on its employment agreement, LJS brought a number of claims against Matthews in the Employment Relations Authority including a claim for reimbursement of the training costs.

LJS told the Authority that the training costs it was seeking reimbursement of related to teaching Matthews to cook fish and chips the “company way”, as well as training she received in cutting fish, preparing food, opening the shop, cashing up, cleaning and serving.

The Authority did not have much sympathy for LJS and took the view that the training was simply normal, on-the job training. It concluded that the clause in the employment agreement requiring repayment of training costs amounted to an unlawful premium and could not be enforced.

That is not to say that an employer can never enter into, and enforce an agreement against an employee to repay training costs. However, the cases where employers are successful all tend to involve the employer paying for the employee to undertake specific external training which the employee receives some personal benefit from.

The fish and chip case is obviously nowhere near as bad as Educasia’s blatant exploitation of its workers. Nonetheless it is genuinely shocking that some employers think that they can get away with this type of behaviour.