A Whakatane man who offered an employee a "free pass" to his wife has been sentenced, alongside his wife, to two months' home detention after a secret recording was made of the encounter.

Bevan Rhys Nelson and Melissa Sue O'Hagan appeared in the Whakatane District Court for sentencing on Wednesday for making an illicit recording.

The sexual encounters between the employee and O'Hagan were secretly recorded by his employer who entered the room intent on joining in. The employee promptly left.

The pair escaped jail but were given two months home detention and ordered to pay the victim a combined sum of $2000, reports Fairfax.

The details of the case were discussed in open court to Judge Louis Bidois.

"I'm not sure it will ever be satisfactorily explained," he said.

"You conspired against the victim to have sexual intercourse with you in group sex. You arranged the victim to stay at your house on this specific occasion the victim was told he had a free pass to have sex with O'Hagan.

"Cameras in the bedroom connected by cellphones captured the event."

The victim engaged in consensual sex with O'Hagan but never agreed to the videotaping. He only found out when Nelson returned to the room with his proposition.

"He was told there was a video recording," Bidois said. "There was the offer of a threesome. The victim became very upset at what happened."

Police suggested the video was used as leverage against the employee.

After the incident Nelson and O'Hagan turned against the employee and even resorted to stealing his property. Bidois took the nature of the offending very seriously.

"There was a breach of trust in that the victim was their employee.

"I have a responsibility to ensure people do not get video recordings in intimate ways without their knowledge. The fear is these will end up on the internet.

"A sentence of imprisonment is the starting point. I limit this to six months and provide a one third discount for mitigating factors. I am prepared to allow this to be served by home detention of two months."

It is understood an employment court matter about the incident is still being decided. All of the tapes and recordings are being destroyed.