Labour Inspectorate regional manager Loua Ward says it's alarming to see a franchisee operating under such a well-established brand mistreat and underpay their staff.

The former operator of a Hastings petrol station has been ordered to pay $252,000 in arrears and penalties after a labour investigation found employees were made to live in "poor" conditions and mistreated.

Pegasus Energy, which operated as a BP station in Flaxmere, owes $132,000 in arrears to two former employees and $120,000 in penalties.

The station is no longer running under the BP brand.

Labour Inspectorate regional manager Loua Ward said the employees were not paid the minimum wage or holiday pay by sole director Jag Rawat.

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In evidence given to the Labour Inspectorate, the employees said they were subjected to working conditions that verged on slavery.

"The employees continuously received threats from Rawat saying that he would cancel their visas and they'd be forced to leave New Zealand if they spoke up about the mistreatment. Rawat also threatened trouble in the employees' home countries on return," Ward said.

"They were subjected to unlawful premiums being deducted from their pay and were at times working up to 16 hour shifts, with lesser hours falsely recorded in the business's records."

The pair was made to live in accommodation provided by the employer and pay excessive amounts in rent, despite poor living conditions where they were required to sleep on the floor, she said.

"It's alarming to see a franchisee operating under such a well-established brand mistreat and underpay their staff. Whether a company is a small business or a larger one such as this, the Labour Inspectorate will hold employers to account," Ward said.

"We are always disappointed to find such blatant abuses of employment and immigration law in franchises such as this, and surprised these businesses aren't doing more to protect their brands."

A spokeswoman for BP said BP took the investigation of employment breaches "extremely seriously" and had dropped the company as its dealer.

The seriousness of the breaches resulted in Rawat being personally liable for a further $24,000 in penalties.

Underpaying and mistreating staff could reflect poorly on a business's brand for years to come, Ward said.

"Migrant workers are vulnerable in New Zealand and may not always be aware of their rights, or may be taken advantage of, which we've seen in this case. Rawat saw himself in a position of power, and used this to his employees' detriment," Ward said.

Rawat previously pleaded guilty to eight charges in the Napier District Court relating to falsifying immigration documents and misleading Immigration New Zealand.