Rail and Maritime Transport Union (RMTU) general secretary Wayne Butson said if it was not for the union member who came across the men while servicing drains, no one would have known about the incident.
Mr Butson said it had been hard trying to find out exactly what happened, resulting in the late release of the report.
"I suspect they just want to hush that sort of thing up with the contractors. Anyway you look at it, it doesn't look good."
A spokesman for the Ministry of Business, Innovation and Employment (MBIE) said the ministry was only made aware of the incident yesterday. The ministry had since requested the KiwiRail and union reports to be reviewed by the ministry "and then further action as deemed appropriate".
Under the Health and Safety in Employment (Mining and underground) Regulations 1999, notification must be made to the ministry as soon as possible after an event and a written report within seven days of an event.
KiwiRail infrastructure and engineering manager Rick van Barneveld told the Bay of Plenty Times it had been open about the incident. "We have acknowledged mistakes were made and have addressed them. We have invited the RMTU to work co-operatively with us to ensure that such an occurrence is not repeated. We provided the RMTU with our investigation report last year and also informed the NZTA."
Mr van Barneveld said there was no evidence immediately after the incident to suggest a report to MBIE was needed.
It exercised its discretion not to inform TAIC.
Union Bay of Plenty organiser Phil Stanswick said the incident was an example of inexperienced contractors taking short cuts.
"There was no supervisor, they're weren't properly trained, they didn't have proper equipment. They were just thrown in there to do a job as quickly and as cheaply as possible," Mr Stanswick said.
"In our view we believe KiwRail management are at fault for not ensuring the contractors were following instructions."
Labour Minister Simon Bridges and Transport Minister Gerry Brownlee would not comment on the incident but a spokesman for Mr Brownlee said the union's version of events was incorrect.
Labour's spokeswoman on labour issues Darien Fenton said a dismissal of the union's account was "outrageous".
A Kaimai Tunnel health and safety focus group would meet in two weeks' time to discuss the terms of reference for a comprehensive review of operations and safety in the tunnel.