Legal Matters

last updated 30/09/2021

Exploiting liquor store owners lose licences and franchise

last updated 30/09/2021

27 September 2021 - Franchisors praised for taking a stand as former franchisee loses liquor licence after worker exploitation

The Labour Inspectorate has welcomed the Alcohol Regulatory and Licencing Authority’s (ARLA) decision to cancel liquor licences for five Canterbury liquor stores owned by Nekita Enterprises Limited, and director Shereen Singh’s manager’s certificate. The move follows worker exploitation uncovered by the Inspectorate, which is part of the Ministry of Business, Innovation and Employment.

The Inspectorate has also praised leading franchise brands in the sector for taking a stand against exploitation and being proactive in promoting employment law compliance among franchisees. Nekita Enterprises previously operated stores under the Super Liquor brand; the franchise agreements were terminated by the franchisor following the investigation.

However, Nekita Enterprises staff have been left fearing for their future following the closure of the stores, according to a report on Stuff.

Exploiters risk being put out of business

In December 2020, the Employment Relations Authority (ERA) ordered Nekita Enterprises, and director Harjit Singh, to pay a combined total of $125,000 in penalties for operating a dual payroll system to avoid paying four employees the minimum wage for all the hours they worked and failing to keep accurate employment records for 59 employees. The case was taken to the ERA by the Labour Inspectorate, following employee complaints. 

The penalties were in addition to $21,390 that Nekita Enterprises had already paid out to those four former employees in outstanding minimum wage and holiday pay entitlements.

Labour Inspectorate retail sector strategy lead Loua Ward says, ‘It is unacceptable for some employers to continually and intentionally breach employment law, undermining employees’ rights and undercutting other businesses. Poor treatment of workers should not provide a competitive advantage in any industry.’

ARLA found that the employment law breaches by Nekita amounted to improper conduct and ruled that the business is unsuitable to hold a liquor licence.

Director Harjit Singh who was found by ARLA to be the ‘directing mind and will of Nekita’ had surrendered his manager’s certificate earlier. However, ARLA noted that if Mr Singh had not surrendered his manager’s certificate, it would have been cancelled. His wife and business partner Shereen Singh also had her manager’s certificate cancelled by ARLA.

‘This ARLA decision has shifted the balance of power as exploiters now risk being put out of business entirely. This decision sends a clear message that businesses that exploit their workers can lose their licences. We encourage liquor store workers who have been exploited by unscrupulous employers to come forward and seek advice from the Labour Inspectorate,’ says Ms Ward.

Workers promised 'pragmatic approach' by immigration

Stuff reported on 23 September that 20 people, many of them on immigrant worker visas, lost their jobs when Nekita Enterprises lost its licences. One, Akhilesh Patti, was allegedly given just 10 minutes’ notice before being laid off. None of the staff received redundancy pay and many are now worried about how they will pay their next rent. 

Ten former workers staged a demonstration outside the Christchurch Justice Precinct on Thursday, calling for the company to be given a grace period to tidy things up.

‘What is the fault of the employees? We were just doing our jobs,’ Patti told Stuff.

Immigration New Zealand says that it applies a pragmatic approach for migrants who lose their jobs while on work visas that are tied to their employment and will work with them on a case-by-case basis to ensure that they can remain lawfully in New Zealand while they make alternative arrangements. 

Industry leaders take a stand

Ms Ward says, ‘The Labour Inspectorate has been engaging with a group of liquor retail and supply leaders, including Liquorland, Super Liquor, The Bottle-O, DB, Lion and Asahi, to share ideas and information about worker exploitation within the sector, and how to work collectively and individually towards fixing this issue.

‘It is encouraging to see industry leaders taking a stand against exploitation and taking proactive steps to lift employment law compliance. For example, Super Liquor exited the stores run by Nekita Enterprises from their brand and have taken steps to better monitor compliance within their franchise network.

‘The majority of New Zealand employers want to do the right thing. Ensuring a level playing field is especially important for the labour market’s recovery from the effects of Covid-19.’

A previous case, where the Employment Court required two liquor store owners to pay $200,000 in penalties for serious employment law breaches, was welcomed by Campbell McMahon, Chief Executive of Super Liquor Holdings Limited. The franchisor said, ‘We’re pleased the court has come out hard and made an example in this case. Super Liquor simply will not tolerate any abuse of fundamental obligations under employment law or exploitation of employees by its franchisees.

'There is no place in the New Zealand business community for this kind of behaviour and we hope that the court’s decision today sends a clear message to employers up and down the country about compliance with employment legislation and its importance.'

The Labour Inspectorate encourages anyone concerned about their employment situation or the situation of someone they know to contact the Employment New Zealand service centre where concerns are handled in a safe environment. 

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