Christchurch liquor tycoon intentionally underpaid migrant staff
Liquor baron Harjit Singh and a company he controls have been fined a combined $125,000 for paying bottle store staff less than the minimum wage and failing to keep vital employment records.
However, Singh and Nekita Enterprises Ltd have been cleared of allegations that employees were forced to pay back some money they earned.
The Employment Relations Authority's (ERA) ruling comes as liquor authorities are set to decide whether to renew an off-licence for the company’s Lyttelton bottle store.
The Labour Inspectorate launched an investigation into Nekita Enterprises after it received a complaint in January 2019 alleging numerous employment law breaches.
Singh and wife Shereen, who have a multimillion-dollar property portfolio, are directors and shareholders of the company, which at the time owned more than a dozen bottle stores in Canterbury and was one of Super Liquor’s largest franchisees.
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The inspectorate’s investigation, which concluded in November 2019, claimed Nekita Enterprises:
Paid four staff less than the minimum hourly wage.
Required three employees to “pay a premium” by paying them the correct hourly rate and then demanding they pay some of it back.
Failed to keep both wage and time records, and holiday and leave records for 59 employees.
The inspectorate filed proceedings with the ERA.
In February, Super Liquor Holdings chief executive Campbell McMahon said the company had cut ties with Nekita Enterprises because “there is no place in the Super Liquor franchise community for this kind of behaviour”.
The matter was heard by ERA member Peter van Keulen in Christchurch in September but the outcome was suppressed until now.
Prior to the hearing, where senior figures of the local Indian community turned out en masse to support Singh, Nekita Enterprises accepted it had paid staff less than the minimum wage and failed to keep proper employment records.
However, it denied seeking premiums from its employees.
Van Keulen’s findings, obtained by Stuff, reveal the company ran a “dual payment system” where employees were paid some hours they worked through the payroll system and the rest at a reduced rate using cash from store tills.
That meant staff were paid less than minimum wage for some hours they worked.
The inspectorate alleged the dual payment system was stopped in late 2016 and replaced by a “cashback” scheme where employees were paid for all the hours they worked through the company’s payroll system and were then forced to pay some money back.
Four former Nekita Enterprises staff who provided statements to the inspectorate’s investigation also gave evidence at the ERA hearing.
“Their evidence about Nekita seeking a premium was not consistent, it lacked detail and when scrutinised it was not convincing,” van Keulen said.
He concluded there was “insufficient evidence” to support the allegation.
Van Keulen said the inspectorate’s investigation proved the dual payment system applied to four employees – all of whom are understood to be migrant workers – and reflected “persistent and deliberate” breaches of minimum wage requirements.
The failure to keep both wage and time records, and holiday and leave records, was “systemic, probably arising out of the likely widespread operation of the dual payment system and Nekita’s practice of recording insufficient employment information”.
“I conclude that all of the breaches were intentional, and were designed to minimise the gross amounts paid to employees and limit the amount of holiday pay paid.”
In weighing up what penalties to impose on both Nekita Enterprises and Singh, van Keulen took into account that the company had reimbursed the four employees for the amount they were underpaid.
However, many staff were “vulnerable” because they had little knowledge of their employment rights and were reliant on their jobs for their right to live in New Zealand.
Singh denied knowledge of the dual payment system.
Kunal Gulati, a manager of one of Nekita Enterprise’s bottle stores, supported Singh’s assertion, giving evidence that he started paying staff under the dual payment system “of his own accord”, rather than being instructed to.
However, van Keulen said Singh’s explanation of what he knew about revenue, salary payments and cash flow through company accounts “was not credible or realistic”.
“I simply fail to see how in his position he was unaware of the dual payment system.”
Van Keulen said it “does not make sense” that Singh did nothing about the dual payment system other than shut it down when it was supposedly brought to his attention for the first time by a labour inspector in 2016.
“This type of behaviour by managers was non-compliant with statutory requirements, potentially fraudulent in terms of Nekita’s tax obligations, had a significant impact on employees’ incomes, and … left Nekita vulnerable to potentially high amounts of liability as well as bad publicity.”
Despite that, there was no evidence of any disciplinary action taken against managers involved or attempts to compensate employees.
“This lack of action by Mr Singh indicates he was aware of and complicit in the dual payment system.”
Van Keulen accepted Singh’s wife was not involved in the day-to-day running of Nekita Enterprises’ bottle stores and had no knowledge of the breaches.
He fined the company $90,000 and Singh $35,000.
Singh told Stuff he was “a bit disappointed” with the outcome but there was little he could do about it.
“It does not matter whether I am happy or not, that is what they found.”
He declined to comment further.
The Labour Inspectorate's Loua Ward said the agency was “disappointed by non-compliance” from the bottle store sector but was pleased Super Liquor had cut ties with Nekita Enterprises.
The case showed exploitation was not a sustainable business model, she said.
Nekita Enterprises’ bottle stores have rebranded under the red and black Canterbury Liquor umbrella.
They are now “satellite stores” of Thirsty Liquor Group Ltd.
Nekita Enterprises faces a battle to keep its Lyttelton bottle store in Norwich Quay open with an application to renew its off-licence expected to receive significant scrutiny from the district licensing committee.
The committee’s decision, which those in the liquor industry keenly await, could set a precedent for the renewal of all Nekita Enterprises’ off-licences.
Labour Inspectorate regional manager Callum McMillan previously said liquor licensing decisions should factor in the applicant’s treatment of staff.
“When district licensing committees grant liquor licences to non-compliant employers, then they have a hand in enabling and normalising the exploitation of workers,” he said.
Stuff previously reported Singh planned a palatial mansion at 480 Hills Rd while the Labour Inspectorate was investigating Nekita Enterprises.
In 2019, he successfully applied to have a laneway named after his late father. That decision is now under review, with a Christchurch city councillor saying the inspectorate’s findings had “tainted” the name.