How the liquor store industry is riddled with worker exploitation

Friday, 4 October 2019

Bottle stores are a tough business. An estimated 40 per cent are surviving by ripping off their staff. National Correspondent Steve Kilgallon investigates.

In July, Arvind Saini had a 22-month-old son and a wife who was ill. He had $200 in his bank account, and the rent was due. He was unemployed, because he had quit his job of three years in a liquor store, sick, he claimed, of being underpaid by his boss.

Saini said Pengkun 'Luke' Liu, who owns several Auckland liquor stores, owed him over $90,000. He'd been paid $10 an hour for the past three years for 65-hour, six-day weeks of work. Saini said asking for his rights led to Liu calling him a criminal.

'He makes me so down. I can't pay my phone bill, I can't buy groceries for my family, I can't pay my rent without borrowing from my friends.'

Saini's story wasn't unusual. After taking 60 prosecutions against liquor store owners in the past two years (and with another 15 in the pipeline), the Labour Inspectorate estimates a staggering 40 per cent of all such stores are breaking the law. For most, that means underpaying and over-working vulnerable migrants, most of whom are too afraid of deportation to speak out about their treatment.

**READ MORE:

* Super Liquor workers allege they were paid just $6 an hour

* The Big Scam: how our immigration system is being rorted

* Liquor stores running on the labour of exploited migrants**

And it wasn't unusual that in late August, Saini could no longer speak about his case because he'd reached a settlement with his former boss which included a non-disparagement clause. Migrant Workers' Association president Sonny Sehgal acted on Saini's behalf.

Sehgal says he fields at least one call a day from a liquor store worker claiming to be exploited by their boss. He's settled nearly 40 such cases at mediation, almost all with privacy or non-disparagement clauses.

But there is now enough evidence of widespread exploitation in the industry, says community lawyer Grant Hewison, to call for a Parliamentary inquiry into labour conditions.

Even liquor industry leaders admit there is a huge problem.

'NOT THE KIWI WAY'

Kuldip Kaur Parihar is reluctant to talk when approached at her home in a new Hamilton sub-division. With her husband, Paramjeet, she owned two Super Liquor bottle stores in the city, but sold both after a Labour Inspectorate investigation.

The couple admitted a long history of exploiting their workers. At a mediation hearing, they accepted a debt of $251,000 to seven workers - one alone was owed $117,000. 'That gives an idea of the exploitation that occurred,' says the Labour Inspectorate's Stuart Lumsden.

But Kuldip Parihar says they only agreed to the settlement to 'keep the peace'. She denies exploiting workers, and says her husband 'knows about all these things'. He doesn't call back.

The inspectorate is now waiting on a decision from a long-delayed Employment Court hearing in which they sought financial penalties to be imposed on the pair.

Campbell McMahon, chief executive of Super Liquor, says he knew he had to act when the Parihar case came to light.

When the Labour Inspectorate began its investigation, the Parihars sold one of their stores, and passed ownership of the other to their son. McMahon says it was during the son's application process to maintain a Super Liquor franchise that the company was 'grossly misled'. Shortly after, they cancelled the franchise.

It's the third franchise agreement Super Liquor has torn up in the past two years, the others were in the Auckland suburbs of St Heliers and Mt Albert. The franchise has faced nine Labour Inspectorate investigations across seven stores in the past three years, with three reaching the Employment Relations Authority.

'We are disappointed and gutted: we have zero tolerance for this,' says McMahon. 'No exceptions: zero tolerance. It is not the Kiwi way…. We will take a hard line.'

Super Liquor has hired employment lawyers Lane Neave to review all their 152 stores, conduct law workshops and training modules and offer free legal advice. They've also updated all their franchise paperwork to stress workplace law, set up an 0800 helpline, produced employee rights' booklets and posters and set up new audits.

The Labour Inspectorate's Lumsden says while Super Liquor seems to be making changes, other franchises are not.

'We are talking to a number of these franchises - Bottle-O, Brew, Super Liquor - and I have to say we've had a very mixed level of co-operation from that … [some] don't seem quite as willing to take responsibility at this point.'

Sehgal is also sceptical. 'Assurances have been given to us by the bosses of the big franchises that they are with us, they are on our side when it comes to these issues. But these assurances don't put money in pockets,' he says.

Because of the way the franchises are set up, as independent businesses, there is no financial liability on their head offices when it all goes wrong.

But what's more galling is there appears to be little impact on rogue franchisees.

Stuff reported on May 8 about alleged worker exploitation at Super Liquor Mt Albert, including the claims of two workers they had been paid as little as $6 an hour for working up to 90 hours per week. The pair said they were owed over $300,000 in lost wages and the Migrant Workers Association called it one of the worst cases of exploitation it had seen. A third worker had agreed to a confidential mediated settlement, while a fourth said he had decided to walk away.

Owner Bhushan Kumar Bansal denies the allegations, which are under investigation by the Labour Inspectorate. He says the employees were merely disaffected former staff who'd stolen stock from him and were trying to secure new visas. He settled with the first to avoid brand damage but is withholding half of the payment because he says the complainant has breached a confidentiality agreement.

CLOSE, RE-BRAND, REPEAT

Bansal's franchise was terminated the same day as Stuff's story appeared. Super Liquor staff arrived to tear down signage and remove merchandise. Bansal says he was given no notice or right to appeal, and was handed a termination letter before opening the store that morning.

But the next day, the store simply re-branded under a relatively new organisation, Brews Group, which is owned by four Indian businessmen with liquor industry links. Business continued.

Bansal says it was easy to re-brand. 'Any other group would take me. You can join any other group straight away, there is no criteria.' Asked if his new franchisor knew of the complaint, he says: 'Everyone knew … it's a problem put up by the employees and it has not been proven.'

Bansal, however, agrees worker exploitation is a big issue for the industry. 'From what is happening in the market, it seems to be an issue. But not here.'

Brews Group shareholder Ambrish Gupta says he can't comment 'offhand' on why they re-badged the Mt Albert Store.

Brews has met with the Labour Inspectorate, and has an 'eye on' the issue of worker exploitation, but Gupta says he doesn't consider it a big issue for the industry.

At 67, Bansal says he's now negotiating to sell the business and retire to England. It angers Sehgal that Bansal can continue operating.

'They just need to change their [sign]board, and he is still running his business. At the same time, the guys we represented are fighting for their justice to get their remaining money.'

In the other two cases where stores lost their Super Liquor franchise, both re-branded to the Bottle-O chain and continued trading.

In a statement, Bottle-O general manager Grant Simpson did not address questions about why the business took over the stores or kept on another with a chequered record. He says Bottle-O has recently met the Labour Inspectorate and produced a proactive plan to combat exploitation.

Lumsden says if a store simply re-brands, the Labour Inspectorate will revisit, but he says liquor licensing authorities should be reconsidering their approach. Rogue operators could be stripped of their liquor licence, on the grounds they are not a 'suitable' person.

A senior liquor licensing inspector told Stuff that inspectors would love to challenge licences on those grounds. They are dissuaded, however, by a landmark 2016 ruling, in which the Alcohol Regulatory and Licensing Authority (ARLA) rejected an attempt to revoke a licence.

In that case, Auckland liquor licensing officer Arthur Wilkinson pointed to ERA decisions against 'Sharma and Sons' for a series of offences as grounds for revoking their license. The company owned two south Auckland pubs and three bottle stores, and had ERA decisions against it for underpaying staff, not providing written employment agreements and failing to keep time and wage records.

The company tried to argue one staff member never worked there, and was simply a passer-by when he twice called police after robberies at the store. The ERA awarded arrears of $45,000 and penalties of $42,000.

But the district licensing authority and the appeal body, ARLA, said those transgressions didn't affect the Sharmas' ability to responsibly sell alcohol.

The Ministry of Justice says as the ARLA is equivalent to a court, it will not explain its position on the issue.

Lumsden says the Sharma and Sons case was a 'real concern' to the inspectorate. 'We would suggest the liquor licensing authority review its policy. … It seems to me that whoever is holding the liquor licence should have to have good character, and have to prove it.'

BUSINESS OF EXPLOITATION

The bottle store industry, say insiders, is a high-volume, low-margin business - one where you need to sell a lot to make a living. Those margins are around 18-20 per cent: that is, on the sale of a $20 six-pack, the bottle store owner collects about $4. But that's before costs - wages, insurance, rent, franchise fee, utilities (power bills are high, because of the walk-in chillers). Most of those costs are fixed, including the price of booze, because all the big chains have negotiated supply deals via their main franchise office. All the major chains are franchised, where stores are independently owned but pay a service fee to cover branding, marketing, supply deals and administrative support.

One insider mentions a retailer he knows is straight, who despairs at his competition down the road consistently undercutting him. 'If there are really low margins, then you wonder how he's doing that … the only variable cost is the staffing,' he says. 'How does he compete? There is only one answer.'

Liquorland chief executive Brendon Lowry says his stores don't try to be the cheapest, instead focusing on selling wine and premium spirits because of the low margins on RTDs and budget beer boxes. Any store which leads on those products and remains open must be questioned, he says.

Lowry says he's approached 'all the time' by franchisees frustrated that they are playing fair, but being undercut by rivals they suspect underpay staff. Franchisees also report approaches from staff at other stores wanting to be paid fairly. Those Stuff talked to say it's the smaller, single-operator stores where exploitation is more likely.

In his three years in charge of Liquorland, Lowry says he's only cancelled one franchise - not for worker exploitation. He believes his chain doesn't have issues, but he won't say the same for the rest of the industry.

'There's a lot of New Zealanders for whom this doesn't sit well,' he says. 'Ripping people off is a terrible situation, and we know it is happening in our industry and I am saddened and concerned.'

Lowry wants the industry to take a collective approach to the issue but he admits there's only a small number of people he'd be willing to work with. 'The minute they [the ones he wouldn't deal with] are in the room, the credibility of the group falls over.'

TOO SCARED TO SPEAK OUT

Those who've studied the industry say the exploitation is principally of recent Indian migrants by an older generation of Indians.

Sehgal says almost every case they've dealt with has involved a recently-arrived Indian migrant on a student or work visa and every employer has been an Indian who has been in the country much longer ('Luke' Liu is a notable exception).

The Labour Inspectorate says a 'culturally integrated business model' is at play.

Senior MBIE officials believe any sector of the economy that becomes dominated, or 'captured', by a single ethnic group becomes a risk because rogue operators will exploit their compatriots. And the Indian community does dominate the liquor store trade.

MBIE supplied data for visas attached to 49 liquor store companies where Indian nationals have an ownership interest; between them they had applied for 119 work visas for other Indian nationals. In an informal survey of five franchise bottle stores in Auckland, all the counter staff were young people who appeared to be of Indian ethnic origin.

Sehgal says there's no fixer in India setting up a string of gullible, exploitable employees. Instead, when migrants arrive and look for work, they naturally search within their own community first.

Liquor is particularly appealing, says a liquor licensing source, because it's known among migrants as a quicker route to residency: manager's certificates are easy to obtain but attract a high number of 'points' towards securing residency.

Lumsden says new migrants are often hired as 'store manager', to satisfy essential skills visa requirements, but in practice work long hours behind a till. Then, he says, they receive threats that if they don't work extra unpaid hours, or refund some of their salary, they will lose their visa.

'[They will say] I will have you deported - even though they obviously don't have that ability, the people coming over aren't au fait with the rules and may be shy of approaching the authorities.'

The other common scam is 'job selling' or paying a 'premium' of between $10,000 and $50,000 for a job; and of selling liquor stores on to the next wave of migrants who've paid for their jobs and can only recoup their money by exploiting even newer arrivals.

A case taken by the inspectorate in 2018 against a Christchurch bottle store owner, Inderjit Singh, demonstrates the reliance of the trade on Indian migrants. Singh was prosecuted for employing an Indian migrant without a valid visa. He said five of his nine staff were migrants on temporary visas and his accountant and lawyer both argued his business would have much higher wage costs if it could not employ migrants.

How widespread is the issue? Sehgal is convinced many more exploited workers suffer in silence. Some who do contact him, he says, simply haven't gathered enough evidence to prove their case, which can be hard when employers hold wage and time records.

Others are afraid.

'I would say there are many more out there too scared to come forward, and many out there waiting for their residency … before they complain.'

But recent publicity may be helping. Arvind Saini confronted his boss after seeing stories on Stuff and watching a series of video interviews of exploited migrants posted on Facebook by Migrant Workers official Sher Singh. Saini says he resigned when his boss refused to pay him his entitlements.

Saini told the union that he'd been underpaid for three years, forced to return $200 a week in cash to his boss, denied holiday and sick pay, and even paternity leave when his son was born, bar two half-days off. He had worked 65 hours a week over six days.

Often he was paid late, he claimed. Saini said: 'He told me to send my wife and baby home if you can't afford them. [I said] 'It's not I can't afford them, it's you can't pay me, that's the problem'.'

When he quit, he says Liu repeatedly pressured him into signing a resignation letter saying he had stolen from the till. Saini refused and instead complained to Immigration NZ and the union.

He provided Stuff with spreadsheets, work rosters and recorded conversations to support his claims.

Saini was able to speak to Stuff in July because negotiations over a settlement hadn't started then. He said he would likely face repercussions within his community for speaking out and it would harm his employment prospects.

Approached at his store, Pengkun Liu repeatedly refused to comment on the allegations by his former worker.

'NO MEDIATION OVER EXPLOITATION'

Sehgal says workers generally settle for 50 to 75 per cent of what they are actually owed, and sign confidentiality clauses.

He's critical of the Labour Inspectorate for not proactively seeking whistleblowers, and he's critical of the Employment Relations Authority insisting on workers attempting mediation before taking formal action.

'There should be no mediation in cases of exploitation. If an employer is exploiting six workers and one has the confidence to come forward and make a complaint, and his case is settled confidentially in mediation, those other five don't know, and won't get their money.'

The Labour Inspectorate recognise this, and they demand its mediation settlements have no confidentiality clause.

'It puts the industry on notice to make sure it cleans up its act [and] it advertises to migrants that we do take it seriously,' says Lumsden. '[And] it puts individual owners on notice that we will take it seriously, and while you think you're winning at the time, you won't be in the long run.'

The Labour Inspectorate appear to be taking steps to toughen up. A new debt management team has recovered $400,000 in arrears in the past six months and is pursuing another $1.2m. They are also taking advice on whether they can hold directors and shareholders personally liable for penalties to prevent them simply liquidating companies, and are exploring the use of the Proceeds of Crime Act. Lumsden says penalties at the ERA and Employment Court are becoming stiffer and the ERA has begun to personally penalise individuals.

'Once that debt is established we have no qualms about taking that particular person out of the industry,' Lumsden says. 'What happens by them remaining in the industry is [it makes it very hard for] the people who are paying their people properly … to compete.

'The other question I would ask the big sellers of alcohol is should they really be supplying these liquor stores? Can we start having a conscience in the supply chain?'

Super Liquor's McMahon laments this tide of exploitation as 'not the Kiwi way'. But for a host of new New Zealanders, ill-treatment by their employers is the only way they've experienced.

* Concerned liquor store employees can call the Labour Inspectorate on 0800-20-90-20 who say complaints 'will be handled in a safe environment'.