MBIE's labour inspectorate investigated the claims and said it could not identify any welfare issues or breaches of New Zealand's minimum employment standards law.
Labour inspectorate general manager George Mason said it was more than likely New Zealand employment law would not apply to the workers, who were China-based and here only temporarily for work.
"Taking all these factors into account, the labour inspectorate has decided that no further action is warranted and the investigation is now closed," he said.
"The workers said during our investigation that they were paid for each day that they were in New Zealand. They did not work on New Zealand public holidays and when they were sick."
Mr Mason said it wasn't possible to tell whether they received the New Zealand minimum wage as employers Yongji and Dalian Locomotive - both subsidiaries of China CNR Corporation Ltd - didn't provide wage records on the basis of privacy.
The workers also declined to tell the labour inspector what they were paid.
Labour MP Trevor Mallard said KiwiRail must immediately stop further Chinese engineers from working here until it could guarantee they were being paid the New Zealand minimum wage.
"The labour inspectorate at the ministry was unable to determine whether they are being paid the minimum wage or receiving annual leave or bereavement leave. They are being paid in China, in Chinese currency."
He said the findings "stink of a cover up".
"I believe the engineers are not being paid the minimum wage and this report seems to confirm that. If wage records don't exist, that is evidence of a breach of our labour laws."
The Council of Trade Unions said Chinese rail engineers were being short-changed of their rightful wage entitlements.
Sam Huggard, secretary for the council, said: "Fair minded New Zealanders would reach the conclusion that if these workers are here in New Zealand carrying out work on our trains, they should be covered by our labour laws.
"The Government's working assumption should be that New Zealand law covers these workers and until this assumption is proved otherwise the labour inspectorate should proceed on that basis and investigate these concerns further."
Mr Huggard said there was a real problem with migrant exploitation in New Zealand, and although the Chinese engineers were not migrant workers, there were a lot of similar problems in this case.
Rail and Maritime Transport Union spokesman Todd Valster said the issue would not have arisen if the work had been done locally.
The union has called for a new investigation into the situation.
"The Chinese engineers are doing warranty work, but that should not mean KiwiRail can avoid its responsibility to ensure compliance with New Zealand wage standards. It is a repeat of the foreign fishing vessels and the exploitation of migrant workers.
"All companies and all employees working in New Zealand must be covered under New Zealand's labour laws."
The investigation found:
- Workers received regular breaks during the working day.
- They lived in accommodation that met their needs and had regular access to food.
- There was no evidence they lived in cramped conditions or had limited access to food.
- Their employer paid for their travel, insurance, accommodation and gave them a daily allowance for food and other expenses. KiwiRail provided lunch each day.
- They were paid for each day that they were in New Zealand, and didn't work on local public holidays and when they were sick.
