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Echoes from the bad old days of the Industrial Revolution

6 September 2008

There has been a lot of publicity recently about the treatment of Pacific Islanders employed under the Government's Recognised Seasonal Employer (RSE) scheme.

Recently Prime Minister Helen Clark praised the scheme's successes. No doubt it is good for some Pacific Islanders.

However, unsettling reports have been given of Pacific Islanders living in disused shops in Hawke's Bay and, more recently, workers on the scheme, from Vanuatu, were interviewed on television complaining about the "rip-off" wages, greedy, if not unlawful, deductions from their wages, and about being paid a different rate from that stated in their contract for piecework.

Deductions had been made for accommodation, clothing, insurance and petrol. For these particular workers a weekly allowance of $75 is paid and the rest is put in a savings account for when they leave.

So the appearance is of a Government-operated scheme for Pacific Islanders to work in New Zealand for, say, six months, but under which some of the workers complain about low wages. The multiple deductions from those wages are leaving them little to cover living expenses.

The complaints are reminiscent of the cries of workers in England and New Zealand many years ago.

The "truck system" is the name given to the way workers were often paid in the late 18th or early 19th century. With the coming of the Industrial Revolution in England, the problems became extreme. Commonly, workers in say, a coalmine, would be given a credit note entitling them to food and groceries from the shop in the village. They might also be given a credit for accommodation. Sadly for the workers, the accommodation and the shop were linked to, if not owned by, the mine owner. The prices of accommodation and food were often exorbitant. Workers often received inferior goods. And all of this instead of cash.

The Truck Act of 1831 was the most significant piece of English legislation in the 19th century. It required wages to be in the currency of the realm (cash) and declared any payment in goods illegal and void.

The New Zealand Parliament passed its first Truck Act in 1891. It was similar to the English legislation though a little more relaxed. The Wages Protection Act 1983 is the New Zealand tail of a long line of legislation dating back to English acts. It repeats the principle that wages are to be paid in money, except that the Crown or a local authority may pay by cheque. It goes further and says that with the written consent of the worker, which may be withdrawn at any time, wages can be paid, say, by direct credit.

It repeats the second principle in the old Truck Acts and legislates that the employer is not to stipulate as to the mode of spending wages, so you are free to spend your money where you like. It also says that with the written consent of the worker, deductions may be made from wages. It also repeats that the consent can be withdrawn at any time.

In a modern society that balance of rights and obligations seems to work reasonably well. The problem, however, for workers from the Pacific Islands, is that many of them speak little English, much less understand their rights and obligations at law in New Zealand. They may sign up for deductions because they think they have no choice.

Conscious of this, no doubt, the Government, through the Labour Department, has a policy document entitled Minimum Requirements for Employment Agreements under the RSE policy that deals with pay deductions. It says they will only be permissible where the employer has submitted the proposed deduction to the Immigration Service for approval and that the requirements of the Wages Protection Act are met.

Significantly, the document says that the amount deducted should be no greater than that deducted from Kiwis' wages in similar circumstances, and must not take a worker's pay below the minimum wage unless it is for airfares.

SOME of the agreements I have seen do not appear to be lawful with respect to deductions. They simply provide that the deductions can be taken out for insurance, clothes or rent without specifying an amount.

Were these deductions approved by the department? This wrongly transfers all the power to the employer. Of course the workers covered by the agreement I saw are on the minimum wage, and the airfares are taken out. So the deductions take them well below the minimum set out in the department policy documents.

There is also the issue of the piece rate payment in the agreement not being honoured by one particular company. That is payment for work done rather than by the hour.

Two things stand out. In the first place the way things work in practice means that the workers are complaining about the same issues as did workers in the mines and other industries during the Industrial Revolution in England before the passing of remedial legislation. In the second place it seems extraordinary that the department does not enforce its own policy and give these people some level of protection. The reality for these workers is that the "clawbacks" from the minimum wage they start with mean that they get very little and will apparently be forced to live in totally unsatisfactory conditions. We are likely to have some very bitter workers returning to their Pacific Island homes.

One hopes that matters will be put right urgently. The average Kiwi will find it unacceptable that people are brought to New Zealand under a Government scheme and feel that they have been misled, and poorly treated.

A case in the High Court at Wellington in 1986 involving a local manufacturer had Justice Ellis researching the legislation requiring that workers be paid in cash and protecting them from unlawful deductions. He observed that the "social evil involved" has been captured by Merle Travis in his "haunting refrain":

You load 16 tons and what do you get?
You get a day older and deeper in debt
St Peter don't you call me 'cause I can't go
I owe my soul to the company store.

Peter Cullen is a partner at Cullen - the Employment Law Firm

Email: peter@cullenlaw.co.nz

Cullen - The Employment Law Firm was one of the first eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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