The telecommunications infrastructure company Chorus says it stopped a trainee worker initiative as soon as it was made aware the scheme used volunteers.
Fairfax reported recently that three men were engaged on short-term, voluntary unpaid contracts by a company subcontracted to Universal Communications Group (UCG) - a Chorus service company in Nelson.
The Labour Inspectorate is looking into whether the optics programme involved unpaid workers from India.
The owner of a Nelson backpackers alerted authorities after the workers left his hostel, one-by-one, looking for cheaper accommodation.
Dave Enting said he was not sure if what happened was illegal, but raised his concern after he spoke with one of the workers who was unable to pay his rent.
"When I spoke to him, he said the three of them weren't being paid for the whole time they were working. I thought that was a bit off because the value of the work that was being done was fairly massive."
Mr Enting said he refunded the guest some of his money, aware that he had formed his view having heard only one person's story and not that of the others who had already left.
"I'm not trying to accuse anyone of doing anything illegal - whether it was or not - it just all seemed a bit dodgy. My first reaction was: 'are they slave labourers from India?'"
'There is no need for volunteers'
Chorus spokesman Nathan Beaumont told RNZ that as soon as the company learned what had happened, it stopped it straight away.
"The use of volunteers was completely unacceptable and as soon as we were made aware that a few people were taking part in the initiative, we put an immediate stop to it.
"UCG advised Chorus that the intention of the programme was to help people who wanted to learn about the industry and see if a career as a fibre technician was one they wanted to pursue further. However, we were deeply uncomfortable with the initiative," Mr Beaumont said.
The volunteers had been living and working in New Zealand for nearly two years and did not work as fibre technicians, but were observers, he said.
"The volunteers did not carry out the same sort of work as fibre technicians. Instead their role was to observe the work being done, identify and become familiar with the various tools used on the job and learn about the health and safety requirements."
Mr Beaumont said if Chorus service companies and their sub-contractors had a position that needed to be filled, it should be paid employment only.
"Today there are strong employment opportunities for fibre technicians and trainees throughout the country, so in our view there is no need for volunteers. If our service companies and their sub-contractors have a position that needs to be filled, it should be paid employment only. This is non-negotiable."
The Ministry of Business, Innovation and Employment said it was unable to comment further as the matter was under investigation.