Khushbu Sundarji
One of the obligations of a franchisee is to obey all laws, including the Employment Law, ensuring that all employees are paid the correct salary or wage and that no employee is to be paid less than the hourly rate stipulated in the Minimum Wage Act 1983.
The last 12 months have seen continued focus on the enforcement of Employment Law by an active Labour Inspectorate. A few recent cases are discussed below.
Domino’s Franchisees
Two Domino’s franchisees in Auckland failed to provide their employees with the correct Employment Agreement and to keep correct wage, time holiday and leave records. The two franchisee companies were fined more than $32,000. In addition, Director Xi Chen paid his staff more than $54,000 in arrears as calculated by Domino’s, which consequently removed the franchisee from the business and the underpayments rectified.
BP Franchisees
Pegasus Energy, which operated as a BP station in Hastings, was ordered to pay over $132,000 in arrears to ex-staff and $120,000 in penalties. Its employees were not paid minimum wage or holiday pay by the sole director, Jag Rawat. The employees were also made to live in accommodation provided by the employer, pay excessive amounts in rent and continuously receive threats from Mr Rawat that he would cancel their visas.
Mr Rawat had previously pleaded guilty in the Napier District Court to eight charges of falsifying immigration documents and misleading Immigration New Zealand. BP advised that it took the investigation seriously and had removed the company as a dealer.
Pizza Hutt Franchisees
A former Pizza Hut franchisee was ordered to pay $150,000 in reparation to former employees and was also convicted under the Immigration Act of 25 charges of exploiting 12 Indian nationals who held work and student visas.
Davinder Singh underpaid employees on student visas who worked more than 20 hours a week but were only paid for 20 hours a week. He also underpaid employees on work visas who regularly worked 45-60 hours a week, but were only paid for 40 hours a week.
In addition, Mr Singh breached the Holidays Act and Minimum Wage Act as he forced employees to work seven days without sick leave, holiday pay overtime or days in lieu for public holidays worked. Another employee living at Mr Singh’s home was forced to cook and clean, while another employee was owed almost $65,000 in outstanding pay.
MBIE Investigation
Restaurant Brands, (the master franchisor for Pizza Hut) said three franchised stores left the network after it was made aware that they were being investigated by the Ministry of Business, Innovation and Employment (MBIE). However, it said that it works with MBE to ensure that its franchisees are compliant with Labour and Immigration Laws and that it has a zero-tolerance approach to any franchisees that are not compliant. It regularly audits franchisees to ensure compliance.
The cases discussed above show a focus by both the franchisor and Labour Inspectorate to ensure compliance by franchisees of all employment laws.
Khushbu Sundarji is an Associate at Stewart Germann Law Office. Phone (09) 3089925; Email: khushbu@germann.co.nz, or visit the website www.germann.co.nz
