A lot of times immigrants to Iceland in low paying jobs like this do not understand their rights. Wouldn't surprise me if this guy has gotten away with it before. Possibly more than once.

Iceland isn't perfect. If a business wants to get rid of someone, they'll find a way to do it. But it is illegal to prevent someone from joining a union, or issue threats like this. Companies over a certain size (50+ I think?) are actually required to have a union representative.