NZ franchisor to pay nearly $200,000 for employment breaches

Following a Labour Inspectorate investigation, the Employment Relations Authority ordered the restaurants to pay $99,000 in penalties for failing to provide minimum wage and correct holiday pay, as well as $97,000 in arrears to 132 employees.

It marks the first time a New Zealand franchise has been penalised for such offences since the Labour Inspectorate issued warnings to the franchise sector earlier this year during a series of seminars held in conjunction with the Franchise Association. Last week we reported that Caltex franchisees in Auckland had to pay over $125,000 of missing wages following a similar investigation, but this involved no penalties as the underpayments were found to be due to payroll errors. 

Migrant students main victims

‘The vast majority of these workers were migrant [mostly Korean or Japanese] students doing part-time or casual work waitressing, bar tending, or in the kitchen,’ says Labour Inspectorate regional manager David Milne. ‘Migrant workers have all the same employment rights as Kiwi workers, and there are no acceptable excuses for employers to fail to meet all their obligations under New Zealand employment law.’

Gengy’s Management Limited are the originators of Gengy’s Mongolian BBQ Buffet franchise chain, while NZ Durham Limited and NZ C & J Limited trade as Japanese restaurants Kushi Takeaways, and Kushi Restaurant and Bar in Central Auckland.

All three companies share the same sole director and shareholder, Wonki (Monty) Cho. Gengy’s restaurant was founded in Hamilton in 2002 and has nine outlets, including franchises, mostly in the North Island.

As a result of these penalties these companies will be placed on the stand down list, preventing them from sponsoring new visas to recruit migrant labour for 12, 18, and 24 months respectively.

More investigations before Christmas

This determination comes as the Labour Inspectorate begins a number of pro-active visits into the hospitality sector in Auckland in the lead up to Christmas.

‘Unfortunately what we’re finding in our initial visits is widespread non-compliance in the hospitality sector, and these employers are set to face consequences,’ says David Milne. ‘Any employer not familiar with their obligations, such as paying time and a half and providing an alternative day off for employees who work on public holidays, should get up to speed now.

‘Failure to meet obligations can mean penalties, restricted access to migrant labour, and damage to the reputation of your business.’

The Franchise Association has said that several of its members are already working pro-actively with the Labour Inspectorate to review their own systems and introduce their educational resources to franchisees. ‘FANZ has already shared these resources with all its franchisor members and will be doing so again in the near future,’ it says. Gengy’s Mongolian BBQ Buffet is not a member of the Association.

Read the full ERA determination.