It is illegal to keep passports in ANY WAY WHATSOEVER, ANY. The passport technically belongs to the country that originally issued it to you, so if you have an American passport for example that is the property of the United States government.

My advice would be to always have a couple of thousand dollars saved up in a bank somewhere so you can leave whatever country you are working in as an ESL teacher at ANY TIME. You also need to keep the information of the consulate of whatever country you are from so you can report any illegal business activities which would violate any laws. In this case the Consulate may consider this to be theft on the part of the crooked business.

Whatever advice I can give you on an anonymous board cannot beat personal research and insistence on proper communication. For example when you are applying to a job you may request to speak with a Native Speaker (fellow expat that is) who is working there and you can get better information out of them than you would from the prospective employer. Use your instincts as they are often better than logic, remember you are dealing with folks from a developing world and a lot of the times what they say may sound good but their behavior once you get there you will find out may be the polar opposite.