An investigation targeting Chorus contractors has found nearly all are breaching employment standards.
Violations include "volunteer" work or extended training periods without pay, plus sub-minimum wage pay.
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The MBIE agency completed 75 visits as part of a joint operation with Immigration New Zealand and Inland Revenue in June.
Initial analysis identified 73 subcontractors rolling out broadband networks throughout Auckland had breached minimum employment standards - confirming the fear expressed by E tū spokesman Joe Gallagher that two cases uncovered by the union in December were "the tip of the iceberg".
This afternoon, Gallagher said he felt vindicated. He accused Chorus of "hiding behind a model that pushes pressure onto subcontractors who don't have the experience of a big player like Downer."
Smaller subcontractors knew they couldn't compete if they followed the rules, Gallagher said.
"The Labour Inspectorate has no current evidence of Chorus itself breaching Employment Standards," the agency's national manager Stu Lumsden says.
"However, it's very disappointing that a national infrastructure project of this scale, which is well resourced, has failed to monitor compliance with basic employment standards."
The Labour Inspectorate is currently analysing records received to prove any breaches, and will then take enforcement action.
Its inspectors can issue an employer an Infringement Notice of $1000 per charge, per employee, up to a maximum of $20,000 for failing to keep employment records.
For the most serious breaches, such as exploitation, cases will now be heard at the Employment Court and carry maximum penalties of $50,000 for an individual and the greater of $100,000 or three times the financial gain for a company.
Chorus chief executive Kate McKenzie says she's extremely disappointed.
"We have always been clear in our expectations of our subcontractors regarding employment practices, to the extent that breaches of employment standards are also breaches of their contracts with us," she says.
"As such, we are urgently seeking relevant detail from MBIE to enable us to immediately rectify any breaches, and to urgently take all other necessary action."
The investigations represent the first phase of inquiry into employment breaches within the data cabling industry and further are planned across New Zealand, MBIE says.
The investigation was triggered by complaints from the E tū union in December last year, centred on "volunteer" work.
The union's complaints were picked up by then-Communications Minister Clare Curran, who urged the Labour Inspectorate to investigate.
At the time, Chorus told the Herald that the company - which is handling the bulk of the UFB fibre rollout - has always been "very clear that the use of volunteers was completely unacceptable As soon as we were made aware that a few people were taking part in the initiative we put an immediate stop to it."
Lumsden says, "We were made aware that migrant workers in the broadband industry were potentially being exploited by various subcontracting companies undertaking work on behalf of Chorus.
"Breaches we observed to date included contracting employers failing to maintain employment records, pay employees' minimum wage, holiday entitlements, and provide employment agreements.
"In a number of cases it was found that contractors deliberately used practices such as 'volunteering' or extended trial and training periods without pay.
"To emphasise the size of the operation, approximately 900 subcontracting companies have had working agreements with Chorus and its three main sub-contractors. Each of these have different work practices ranging from the compliant down to the outright exploitative, so the investigations are very involved and will continue.
"Many of these employees represent a vulnerable section of the New Zealand workforce that often aren't aware of their minimum employment rights, and are concerned with their visa status. Large companies such as Chorus need to be proactive and ensure that their contractors and subcontractors are not exploiting their workers.
"It's very disappointing that a national infrastructure project of this scale which is well resourced has failed to monitor compliance with basic employment standards.
"Despite earlier public assurances from Chorus that any breaches involving its contractors were isolated cases, the investigations and analysis to date demonstrates systemic failures in quality management," says Lumsden.
The Labour Inspectorate is continuing with its investigations with a view to taking a wide range of compliance actions.
"This is simply not acceptable and it is not welcome in New Zealand workplaces," Workplace Relations and Safety Minister Iain Lees-Galloway says.
"This activity is in breach of minimum employment standards required by law, it is clearly exploiting migrants, and it is a timely reminder why the Government is strengthening employment law to protect vulnerable workers."
In December, Chorus said that while it was not directly liable, all service company contracts with Chorus contain detailed health and safety and competency requirements that must be adhered to, and the law complied with.
"Chorus has been assured by its service companies that all employees and subcontractors are appropriately employed and adhere to health and safety standards," Chorus Network and Field GM Ed Beattie said.
"Technicians must undergo induction training, including health and safety, before conducting any work on behalf of Chorus. Regular spot checks are also undertaken to ensure compliance."
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