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Commercial

Business continuity planning

Commercial, Your Own Business
0

An essential component of running a business

Once reserved for large businesses with a high degree of public dependency, such as banking, hospitals or utility companies, business continuity and disaster recovery plans have become increasingly important for businesses of all sizes. Severe weather events such as Cyclone Gabrielle have increased the importance of planning for the unexpected.

While there is no legal obligation to have such a plan, they help businesses maintain a high level of engagement with clients, customers and staff during times of uncertainty while also creating an environment that is supportive of revenue generation. Good business continuity planning also ensures your legal and compliance obligations are not accidentally overlooked during a time of high stress and uncertainty.

 

What is a business continuity plan?

A business continuity plan (BCP) is also known as a disaster recovery plan or an emergency plan. Sometimes businesses split the plan into different areas that cover their response in an emergency (workplace death or serious injury, active shooter, robbery or sudden loss of digital services), disaster (earthquake, flood or pandemic) and business continuity (how we continue to work once we have responded to the disaster or emergency).

 

Creating a BCP

When creating a BCP it is critical to look at all elements of your business and what could happen in various scenarios. Asking yourself questions will help form the basis of your BCP, such as:

  • What are our key services?
  • How do we deliver our services?
  • What may we lose in a disaster and how can we protect against that loss?
  • Do we need to invest in technology or training for our staff?
  • Who are our key contacts, clients and stakeholders (don’t forget the staff)? We should have a communications plan to be in touch with all.
  • Do our contracts protect the business from unnecessary loss?
  • What do we need to do to safeguard the reputation of our business?

Once a plan is in place, it is essential to test this plan with your staff. Not only do they bring a different perspective, but it also ensures that those people ‘buy in’ to the plan, and are prepared and trained in the BCP so it will work efficiently if you ever need to activate the plan.

 

Regulatory and legal considerations

Employment  

Generally speaking, if your employees are ready and willing to work and, due to no fault of their own, there is no work that can be completed, the presumption is that your employees who would ordinarily be working are entitled to be paid.  This means your BCP should consider how staff can add value to the business during the period. Additional planning should include ensuring that your individual employment agreements anticipate what may be required of your staff during a BCP event.

WorkSafe has been vocal that employers have a responsibility to help manage their employees’ wellbeing. This is especially important during times of increased stress. Your BCP should ensure you have effective communication methods with your staff, including the ways in which the business will support them. This will help ensure that you have taken adequate steps to mitigate additional stresses on your staff.

Privacy  

During a BCP event, without adequate planning and systems in place it is surprisingly easy to breach your obligations under the Privacy Act 2020 when staff are working from home.  Having work-related documentation available in the home to non-employees, as well as access to servers on personal computers that aren’t adequately protected could lead to substantial breaches of privacy.

Availability of information  

Some business documentation must be retained for several years, for example: tax returns, safety audits, professional services audits and so on. In a disaster, if your physical premises are destroyed or inaccessible, how will you comply with the required provision of information?  Since the COVID lockdowns taught many businesses the importance of being agile in a physically restricted environment, it is reasonable to think more regulatory bodies will be intolerant of excuses around a sudden loss of data that was insufficiently backed up.

Storage of information

If your business uses cloud storage of data or remote servers for backups or emergency continuity, care must be taken to ensure all data is stored in accordance with New Zealand privacy laws. If the data is stored offshore, the collector of the data (that’s you or your business) is responsible for ensuring it is stored and handled at a standard comparable to New Zealand’s privacy obligations.

Contract risk

Your terms of engagement or terms of trade should dictate what standard of service you are required to offer your clients or customers during a business disruption.  Equally, when you have contracts with other businesses, you should review their contract terms to ensure they will be sufficiently flexible for you during that disruption.

Preparation is key

A good BCP should help your business prepare in the face of many unpredictable environments, far beyond the basic natural disaster scenario.  The best plans are regularly reviewed, rigorously tested by business owners and staff, and are flexible to adapt to the need at the time.

If you have any questions about BCPs or would like our help in putting one together, please don’t hesitate to contact us. We are here to help.

 

 

DISCLAIMER: All the information published in Commerical eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Budget 2023

Commercial, Health Issues, News, Your Own Business
0

Key points

With the country expecting a no-frills Budget to match the Hipkins’ government’s bread-and-butter focus on issues for 2023, this year’s Budget had few surprises.

The government has a tightrope to tread in trying to deal with inflation, supporting the recovery from the Covid pandemic, and managing the significant economic effects of the Auckland Anniversary floods and the devastation from Cyclone Gabrielle. The Minister stood by his earlier statement that there would be no tax cuts in this Budget, but there would be increased cost of living support.

Already announced over the last few weeks have been a $1 billion flood and cyclone recovery package, funding for climate change initiatives, and additional funding for education and the New Zealand Defence Force.

On the afternoon of Thursday 18 May, the Minister of Finance, the Hon Grant Robertson, presented the Wellbeing Budget 2023 – Support for today, building for tomorrow.

The Minister focused on four themes:

  • Supporting New Zealanders with the cost of living
  • Delivering the services New Zealanders rely upon
  • Recovery and resilience, and
  • Fiscal sustainability.

We summarise the key points of this year’s Budget.

 

Cost of living support

There is to be free public transport for children under 13 years old, and permanent half-price fares for those under 25 years old. The Minister said, “This will help passengers meet the cost of public transport and encourage increased use, while also supporting New Zealand to achieve its climate change goals.”

The $5 co-payment for prescriptions will be removed from 1 July.

The government has pledged to lower households’ energy costs. It has expanded its Warmer Kiwi Homes Programme providing around 100,000 new heating and insulation installations; 7,500 hot-water heat pumps; and five million LED light bulbs.

For early childhood education, eligibility criteria for 20 hours’ Childcare Assistance has been extended to cover two-year olds, as well as three-to-five year olds. The subsidy rates will be increased. This comes into effect on 1 March 2024.

 

Delivering more reliable services

The government has acknowledged the need to make significant investments to protect and improve public services for Kiwis.

Housing: There is increased funding to deliver 3,000 new state houses.

Education: As announced a week ago, there is a commitment to boost skills, improve achievement, reduce class sizes and increase teacher pay. There will be 6,600 additional student places, and new classrooms and schools to fit them in.

Health: The government is to focus on the effects of winter on the health system; the urgent need for more medical staff (including 500 nurses), and to reduce the massive waiting lists.

There is a commitment to spend more than $1 billion to increase the pay rates and boost staff numbers, and $20 million to lift Covid immunisation and screening for Māori and Pacific peoples.

The Budget includes a range of investments to support Māori and Pacific peoples. These include:

  • Investment of $223 million to improve housing outcomes for Māori. This includes $23 million for an extension to the Te Ringa Hāpai Whenua Fund and $200 million to increase the supply of Māori housing and to repair homes in Māori communities.
  • Supporting whānau and tamariki by expanding Whānau Ora services and support for wāhine hapū in the first 1,000 days of life for their pēpi, and
  • $143 million has been set aside to foster Māori and Pacific language and culture.

 

Recovery and resilience

The government has already announced its package for the recovery and its investment in regional resilience from the Auckland Anniversary floods in late January and Cyclone Gabrielle in February.  There is a commitment for $71 billion across the next five years for new and existing infrastructure investment (schools, hospitals, public housing, rail and road networks), in addition to funding set aside for projects that are still in the planning stage.

Acknowledging the need to rebuild New Zealand’s crumbling infrastructure, $6 billion over a 10-year period has been allocated for a new National Resilience Plan. Initially focusing on ‘building back better’ from the effects of the floods and cyclone, it will also fund the country’s long-term infrastructure deficit, and develop a credible pipeline to support the plan.

 

Fiscal sustainability

Whilst the Minister held fast on his promise not to raise income tax, the trustee tax rate (currently at 33%) will increase to 39% from 1 April 2024 bringing it into line with the top personal tax bracket. The Minister says this will create fairness and remove a potential loophole.

Whilst the Minister confirmed that the country’s economy has emerged from the three years of Covid in a ‘solid position’ – the economy expanded by 2.4% over the 2022 calendar year and modest growth is anticipated for this year – there are headwinds. The continuing impact of the war in Ukraine, and worldwide inflation will affect New Zealand’s economy.

Although inflation peaked at 7.3% in June 2022 and eased to 6.7% earlier this year, rising immigration to this country and the government’s investment in infrastructure projects will increase demand. This may put more pressure on the Reserve Bank to contain inflation.  Whilst New Zealand is not in a recession, recovery from the knocks of the past few years may take longer than anticipated. The government expects the books to return to surplus in 2025–26, a year later than Treasury’s December 2022 forecast.

The 2023 Budget is very much what the government had said it would do – no huge surprises and keeping a firm hand on the tiller to make New Zealand a better country in which to live. The proof, however, will be in the pudding as the year proceeds.

 

To read more detail about the Budget, click here for the Minister’s speech.

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.


Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Subdivision consents

Commercial, House, Property, Rural
0

Recent changes to planning rules

In the Autumn 2022 edition of Property Speaking we discussed different types of resource consents. Since then, the government has released a new National Policy Statement for Highly Productive Land (NPS-HPL), which you can read here. The purpose of the NPS-HPL is to ensure that highly productive land is protected for use in land-based primary production, both now and for future generations. Councils are now required to consider the need to preserve highly productive land when determining any application for a subdivision consent.

Subdivision consent

If you want to change the size of your section by purchasing some of your neighbour’s property and merging it with your own (a boundary adjustment) or you want to split your property into additional property titles, then you will need subdivision consent from your local council.

Requirements

Your region’s district plan sets out the requirements that you must meet in order to subdivide your property. In addition to the requirements being different between regions, the requirements are also different depending on the zone in which your property is located. Properties are divided into zones that consider the standard characteristics expected in that area. The zones are:

  • Residential
  • Commercial/retail/town
  • Industrial
  • Rural lifestyle
  • Rural production, and
  • Special purpose.

The names of the zones may differ between regions but there will be a zone for each of those standard characteristics.

Conditions

Consent for your subdivision is likely to come with conditions.  Your local council may also ask that part of your property is transferred to the council; this is known as ‘vesting.’ Sometimes the council will pay you for that land but other times it will form part of your development contribution.

Areas around waterways may be taken for an esplanade reserve or esplanade strip, whereas areas of land that will become roads may be taken for road reserves.

The council can also require that new subdivisions have certain design specifications which are dictated through the district plan; these are recorded on the property title in a consent notice.

Affected parties

Where your subdivision is not a permitted activity, or it does not fit within the standard requirements for a subdivision in that area, the council may still grant you consent on a ‘notified basis.’ This means that it provides notice to affected people who can then raise any concerns with your proposed subdivision within a specified time.

The council may add further conditions to the development or even refuse the consent depending on any concerns raised.

Highly productive land (HPL)

In addition to the prior considerations that councils had to consider, since 17 October 2022, they now must map the land within their region to determine if it is HPL. In general, land will be mapped as HPL if it is:

  1. In a general rural zone or a rural production zone
  2. Predominantly within an area with a Land Use Capability class of between 1–3. A helpful map shows the current class of land within New Zealand here
  3. Not identified for future development within the relevant district’s district plan as at 17 October 2022, and
  4. Forms a large and geographically cohesive area.

Councils have the next three years to remap all the land within their region. Until that mapping is completed, all land will be treated as HPL if it falls within categories 1–3 above.

Most of the Land Use Capability class 1–3 land is within Northland, Auckland, Waikato, Bay of Plenty (between Tauranga and Whakatāne), Taranaki, Manawatu, Canterbury, Otago and Southland, although there are smaller areas of class 1–3 land throughout New Zealand.

If you are applying for a subdivision consent, your local council will consider whether the land is HPL and, where it is, it will be much more difficult for you to obtain a subdivision consent.

Since the NPS-HPL came into force on17 October 2022, it has caused problems for landowners who had subdivision consent applications for land within class 1–3 areas pending on that date. Councils had to reassess applications taking HPL into account. This, in some cases, resulted in consent being refused.

If you are thinking about subdividing your property, especially in a rural zone, do talk with us and your surveyor early on. We can discuss the specific planning requirements that now apply to your property and help assess whether your subdivision is likely to receive consent before you proceed any further on the development.

 

 

DISCLAIMER: All the information published in Property eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Business briefs

Commercial
0

Employment Court rules four Uber drivers are employees

In October last year, the Employment Court ruled that four Uber drivers are employees rather than independent contractors[1], challenging the traditional gig economy model.

You can read the full Uber decision here.

The court’s ruling means that Uber drivers could now be entitled to receive the minimum wage, holiday pay and other benefits that are typically provided to employees.

Two major factors that led to the court’s decision were that:

  1. Uber drivers are dependent on the Uber platform for the opportunity to earn income, and
  2. Uber exerts a significant degree of control over the way in which the work is performed.

This decision is a landmark ruling that potentially has far-reaching implications for the gig economy as a whole, where companies such as Uber typically classify their workers as independent contractors.

If you engage workers as independent contractors, we recommend you carefully consider whether the nature of the work gives rise to an employment relationship. Please contact us if you need specific advice.

[1] E Tū & Anor v Rasier Operations BV & Ors [2022] NZEmpC 192

 

Facial recognition and the Privacy Act: balancing security and individual rights

The Office of the Privacy Commissioner has urged businesses to proceed with caution when using facial recognition technology (FRT).

The Commissioner’s warning comes as Foodstuffs, that owns Pak’n Save, New World and Four Square, trials the use of FRT in 29 North Island stores. Foodstuffs says its use of FRT is aimed at preventing crime, and keeping its staff and customers safe.

The Commissioner is doubtful whether the benefits of FRT outweigh its privacy-intrusive nature in the retail setting. The Commissioner is monitoring Foodstuffs’ controlled trial and will release a report outlining a proposed regulatory approach to FRT at the end of this year.

If you are thinking about using FRT for your business, you should conduct a privacy impact assessment. If you need more help, please be in touch.

 

Cartel conduct: Commerce Commission warns eight freight forwarding companies

In October 2022, the Commerce Commission warned eight freight forwarding companies for likely engaging in cartel conduct. This highlights the need for businesses to take care when entering into a supplier/customer relationship with competitors.

The warnings related to conduct that occurred between 2014 and 2018. At that time, the eight companies engaged Mondiale Freight Services Limited and Oceanbridge Shipping Limited to provide wholesale freight forwarding services. These services included, for example, a company combining its customers’ freight with that of Mondiale or Oceanbridge, for the sake of efficiency, if the company did not have a full container of freight.

Given the eight companies were also in competition with Mondiale and Oceanbridge, they were concerned Mondiale and Oceanbridge would learn confidential and commercially sensitive information regarding the companies’ customers. To protect against this, the companies entered into arrangements with Mondiale and Oceanbridge not to compete for each other’s customers. This included:

  • Refusing to quote for the other party’s customers
  • Apologising to the other party when the other party’s customers were approached, and
  • Discussing the amount a party should quote the other party’s customers to ensure the price would not be competitive.

The commission considered these arrangements likely amounted to cartel conduct and went further than necessary to protect the companies’ confidential and commercially sensitive information.

In June 2022, Mondiale and Oceanbridge were fined almost $10 million combined for their involvement. The commission decided on a warning for the eight companies given they had significantly less market and negotiating power.

All businesses entering into a supplier/customer relationship with a competitor should ensure the arrangement does not breach their obligations under the Commerce Act 1986.

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

What is the PPSR?

Commercial, Property, Your Own Business
0

Gives protection when leasing or selling goods

Anyone who has been in business, even for a short time, will have encountered the PPSR (Personal Property Securities Register). The PPSR is a searchable online register that records if a third party has a financial interest in the assets of individuals or entities.

The register only records interests in personal property (not land). Personal property includes all property that is not land or ships.

If you or your business leases or sells goods on credit terms, or if you have lent money to a third party, you should seriously consider registration on the PPSR in order to protect your business or yourself.

Registering a security on the PPSR

It is helpful to look at examples where registration on the PPSR would be appropriate.

  • Leasing assets for a term of longer than 12 months, such as eftpos or photocopier equipment
  • Selling goods on credit terms, for example, payment is due on the 20th of the following month
  • Selling goods on consignment terms where payment is due when the goods are sold, or
  • Making a loan to an individual or a company.

In each of the above situations, registration on the PPSR provides you with protection if rental payments or invoices are not paid or loan payments are not kept up. PPSR registration ensures you will be paid before parties that do not have registered securities.

If you register, you may be able to collect any goods or even trace the proceeds of the sale of those goods. When goods are supplied on credit terms, a ‘super priority’ exists if registration is completed within 10 working days of delivery of the goods. This super priority will have priority over all prior registrations no matter when registered.

What happens if I do not register?

If you don’t register on the PPSR, it may mean that you are not paid in full – or at all.

How to register?

To register on the PPSR you must have a contract with the party you have leased to, sold goods to or lent money. That contract needs to include a right to register on the PPSR.

Timeliness of registration on the PPSR is critical. Where there are two registrations in respect of the same property the first registration will have priority.

Registration is completed online here.

Searching the PPSR

You would search the PPSR if you are:

  • Considering leasing, selling, or lending to a third party to determine what other obligations and registered securities they have
  • Considering buying personal property from a third-party. The most common example of this is the purchase of a motor vehicle. Money may be owed on the vehicle, and without having the security discharged as a condition of purchase, you run the risk of losing the vehicle and the money you paid for it
  • Buying a business that includes personal property as part of the assets
  • Selling a business and you want to determine if any money needs to be repaid, or
  • Buying land with buildings on it that includes chattels.

How long does PPSR registration last?

Registrations on the PPSR expire five years after registration. It is important to note when to renew registrations before they expire. If registrations are renewed, their priority continues from the date of the original registration.

If registrations are not renewed and you subsequently reregister, the priority will be from the date of the subsequent reregistration.

What if things go wrong?

If a person or entity you have leased to, sold goods to or loaned money to becomes bankrupt, goes into liquidation or placed into receivership – what should you do?

Talk with us as soon as possible so we can advise you on your options. If you have registered on the PPSR, your position is stronger than if you haven’t.

Regularly lease, sell goods or loan money to third parties?

We can help you to review your existing contracts or prepare contracts to help protect your business. We can advise you on how and when you should register on the PPSR.  Navigating the PPSR is fairly straightforward. If, however, you have any questions or queries regarding the PPSR and how it benefits or affects your business, please don’t hesitate to contact us.

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Letter of intent

Commercial
0

Useful, but can present problems

A letter of intent, also known as a heads of agreement, is often used by parties before entering into a formal contract. While such a letter can be a useful tool to maintain momentum during a commercial transaction, the document itself has been the centre of many disputes over the years.

We give an overview on why parties may wish to use a letter of intent, and the downsides that could lead to business losses and commercial disappointment.

What is it?

A letter of intent is a signed document with two or more parties that shows a commitment to achieve a particular outcome – usually in a commercial setting. A common example is when two or more parties are forming a joint venture or one party is procuring services from another.

The document may contain terms that have been agreed upon to date. It may include, for example, the subject of the transaction (a joint venture, merger, etc), key dates, pricing and details around what remains to be determined.

Purpose

Setting out the terms that have already been agreed can allow the transaction to proceed with confidence to more costly stages such as engaging specialist legal or taxation advice. It can also help tie together many different points of a negotiation process and give clarity to the parties as to what still remains to be resolved.

What could go wrong?

The primary issue with a letter of intent is enforceability. A letter often requires some goods or services to be procured while the contract is not yet finalised. If the letter is found to be unenforceable, this could lead to significant losses. For example, in a 2020 case[1], the High Court determined that the letters of intent exchanged between the companies did not constitute a binding contract. In this matter, Electrix had provided services of up to the value of $28 million, despite the various letters of intent exchanged between the parties capping the work at approximately $14 million. The High Court found in favour of Electrix and determined that because there was no binding contract, Electrix was entitled to recover its reasonable costs of services rendered.

The accepted legal position is that letters of intent can be both enforceable or unenforceable; the content of the agreement, as well as the conduct of all the parties to the document, will be relevant in deciding if a letter of intent is enforceable.[2]

This means that if a party is relying on the spirit of a letter of intent and the transaction is cancelled or it is unenforceable, the result could mean a significant over-investment and loss for that party. It could also mean that after not following through on a letter of intent, a disappointed party could challenge the right to cancel or one party could seek to limit their losses, which can result in costly litigation.

If you really want a letter

A letter of intent should always be reviewed by your lawyer before it is signed. It is particularly important to ensure all parties receive legal advice on the enforceability of the document before it’s signed.

At a minimum, a letter of intent should state whether the letter is intended to be binding, if only parts of it are binding, and what happens if the parties decide not to proceed.

If all parties involved are seeking a non-binding and unenforceable document that ties together all the threads of a negotiation purely for reference or record keeping, a letter of intent may be a great option. In these circumstances, the letter of intent must be abundantly clear that it is not designed or intended to create a legal obligation between the parties.

Is a letter of intent worth the risk?

Considering the risks outlined above, it may be reasonable to ask why non-binding letters of intent are even used?

A non-binding letter of intent can be a useful way to document negotiated and agreed points in complex business transactions with multiple parties or stages. It can also be used as a good faith gesture from each party that the documented terms have been agreed and will not be renegotiated. A good faith gesture allows the necessary legal or taxation advice to be given with certainty while leaving the parties with the flexibility to back out if necessary or desirable.

If you want to secure services or a form of commitment that is available in a letter of intent while a formal contract is being prepared, tread carefully. If there is sufficient information to reach a formal contract, finalising a contract will provide the best protection and certainty to both parties.

If you are entering into a complex legal transaction and are considering using a letter of intent, please contact your lawyer before you sign it.

 

[1] Electrix Limited v The Fletcher Construction Company Limited NO 3 [2020] NZHC 2348

[2] Lord Justice Robert Goff in British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Postscript

Commercial, First Job, News, Your Own Business
0

Minimum wage increased on 1 April 2023

The adult minimum wage increased to $22.70/hour on 1 April 2023.

 

This is a significant increase, up from $21.20, and aligns with the 7.2% rate of CPI inflation in the year to 31 December 2022.

 

Also increased on 1 April were the training and starting-out minimum wage rates that are increased to $18.16/hour; this is 80% of the adult minimum wage.

 

For an employee who works 40 hours/week, the minimum wage rise to $22.70/hour means they earn an additional $60 each week before tax.

 

The government says it will review the minimum wage rate later this year.

 

Renew your employees’ pay rates

If you haven’t done so already, you should review your employees’ pay rates to ensure you are compliant with the new minimum wages. For employees on a wage this is a straightforward process as you only need to ensure that their wages are at least $22.70/hour. This is not the case for all employees, however, as it includes those on a salary whose current pay rates may be sufficient when they work overtime.

 

During busy times, salaried employees often work hours over and above their regular employment agreement hours. You should check the pay of these employees every pay period to ensure their pay divided by the actual hours they worked meets minimum wage requirements. If not, your employee’s pay must be topped up to at least the minimum wage, regardless of whether any term in their employment agreement says otherwise.

 

Failing to keep accurate time records could lead to a penalty under the Employment Relations Act 2000 or Holidays Act 2003.

 

You should also take the opportunity to ensure your time recording systems are accurate.

 

 

Improving the sustainability of your supply chain

All businesses in New Zealand should be working towards making their supply chain more sustainable – we all have a responsibility to help save the planet.

 

The Ministry of Business, Innovation & Employment states that about 70% of your business’s sustainability impact comes from your supply chain – so this is a good place to start.

 

Launched in February 2023, Docket provides a free (and short) online assessment, and practical tools and guides for you to see how well your business is caring for the environment and your team. Docket was created by the Sustainable Business Network in partnership with the government and the private sector.

 

To find out more, go here: https://sustainable.org.nz/docket/

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Driving on a limited licence

Commercial, First Job
0

Can be done, but strict conditions apply

Driving licences can be suspended for various reasons: excess demerit points, careless or dangerous driving, drink driving, causing an accident and many others.

 

Generally, if you commit one of the above offences your licence could get suspended for a period of three to 12 months, depending on the severity of the offence.

 

The question then becomes, what if your livelihood depends on you having a driving licence? Under the Land Transport Act 1998, the law allows you to apply for a limited licence.

 

Application process

To obtain a limited licence, you must satisfy the court of two factors.

 

First, you must show that you would suffer extreme hardship; a self-employed person who depends on driving to work is an example. If you cannot drive to work, you cannot earn an income, pay your mortgage, bills and other day-to-day essentials.

 

Telling the court that not having a licence would be an inconvenience to you is not enough. The devil is in the detail. Evidence must be provided of your annual income; weekly expenses; that taxi fares are unaffordable; why using public transport is not feasible; you (or your business) cannot afford to employ a driver for the suspension period; your friends or family members cannot drive you during the suspension period and so on. Consulting with us will make this process easier.

 

Second, you must illustrate that the people around you (your family or employer) would suffer undue hardship if you are unable to drive. ‘Hardship‘ (whether extreme or undue) is not limited to financial hardship. The court may grant a limited licence if evidence suggests that a driver may suffer emotional hardship in not being able to drive. For example, an elderly man, who lives alone and volunteers daily at his local sports club (cleans up the sports field, mows the grass, etc) may suffer mental and emotional hardship if he cannot go about his daily routine due to his suspension.

 

Restrictions of a limited licence

Keep in mind that ultimately the court still seeks to punish drivers who commit traffic offences. A limited licence means just that; it restricts what you can and cannot do during your suspension. You may only drive within a certain area, during a specific time period during the day and may not exceed a specific number of hours per day. Using the elderly man example above, he would only be allowed to drive within an area that includes his home, supermarket and his local sports club between X and Y hours and on Z days. Suspended drivers with limited licenses are supplied with a logbook to record this information.

 

If you commit a further driving offence or breach the terms of your limited licence during your suspension period, your limited licence will be terminated and your initial suspension will fall back into place.

 

Every situation is different

Every case has its unique circumstances and each application should be tailored to its facts and merits. If you would like to know more about limited licences and how to apply, please don’t hesitate to contact us.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Guest editorial: Having a cyber resilient business

Commercial, Your Own Business
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It’s hard to ignore the headlines; the past few years have brought floods, plagues and an unprecedented rise in cyber-attacks. New Zealand businesses have taken the brunt of these events. Some have been pushed to breaking point.

 

Floods and plagues are tangible events. We can usually see them coming and prepare for the worst. Cyber-attacks are like a bolt of lightning, one minute it’s a sunny day, and the next minute your business is on fire and you are scrambling to mitigate the damage.

 

Cyber resilience is a measure of how well you can manage a cyber-attack or data breach while continuing to maintain business operations effectively. There are some simple steps you can take to make your business more resilient to cyber-attacks.

 

Step One: Know what you are trying to protect

All businesses have information that, if lost, would compromise the viability of the business. When considering what you need to protect, think of your information as assets in terms of maintaining their confidentiality, integrity and their availability of access. Which ones are the most important for your business to protect?

 

Knowing what you need to protect makes it easier to determine whether your cybersecurity protections are sufficient.

 

Step Two: Mind the gaps

Cyber resilience is more than just having anti-virus installed. Pay attention to the resilience of your people, processes and technology; cyber health checks will identify gaps and recommend improvements. Specialist cyber resilience companies such as Intelligensia provide impartial assessments of your cyber resilience and can liaise with your IT provider to get you the right the level of protection.

 

Step Three: Know your risk appetite

Know how much risk you are willing to accept for your business. This helps you decide how much you need to invest in cybersecurity protections. For example, if you keep sensitive client information, invest in offline back-ups that can’t be compromised if you succumb to a ransomware attack. An investment in off-line backups will not only minimise the loss of information, but also your downtime.

 

Step Four: Business impact

During the recent floods, power, phones and the internet were disabled for some time. A cyber-attack on your managed IT services provider or software vendor could similarly leave you with no access to your computer systems or information for extended periods. Think about the business impact if you can’t access your customer, financial or bookings information for an extended period. Use a scenario of not having access to vital tools and information for up to a month. During large scale cyber-attacks, your IT providers will be juggling competing demands to get multiple businesses operational again. Check your service level agreements and know the level of support you can expect.

 

Step Five: Incident response plan

An incident response plan lets you take a methodical approach to deal with a cyber-attack when it occurs. Many businesses think that calling their IT provider to fix the problem is all that is needed. Certainly, they can fix the technical problems, but you have obligations as well. For instance, you may need to notify the Privacy Commissioner if personal information has been stolen. Failing to report information breaches can result in a hefty fine. Informing customers that you’ve lost their information is another requirement. The way you manage a cyber-attack will determine the impact on your business’s reputation and your customers’ level of trust.

 

Essential to be cyber resilient

Cyber-attacks are on the rise. They increased 600% during the pandemic; security commentators predict that this year a business will suffer a ransomware attack every eleven seconds. More than 90% are caused by someone clicking on a phishing email. It’s not a case of ‘if’ you get attacked, rather ‘when’. Being cyber resilient puts your business in a much stronger position to weather the storm and recover quickly from a cyber-attack.

 

If you want your business to survive in today’s digital economy develop your cyber resilience now.

 

Jan Thornborough established Intelligensia in 2021 after realising that although big organisations were dealing with cyber risks, small and medium-sized business and not-for-profits were being left behind. Intelligensia’s mission is to bring the same level of expertise enjoyed by large companies and government agencies to smaller organisations.

 

Previously, Jan was head of the cyber resilience unit at New Zealand’s National Cyber Security Centre that helps nationally significant organisations become more cyber resilient.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Keeping your employees during the ‘big quit’

Commercial, First Job, Your Own Business
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Retention tools and some risks

Since 2021 and the lessening of the effects of the Covid pandemic, many countries have experienced an increase in staff turnover and lost productivity. This is informally referred to as ‘the great resignation’, ‘the big quit’, ‘brain drain’ and ‘quiet quitting’.

 

These trends are concerning as turnover and lost productivity present further challenges to businesses that may already be struggling in a weakening economy.

 

Employers can implement retention tools to minimise turnover and ensure employee engagement. As with all employment contractual changes, care needs to be taken to ensure that these do not result in unexpected consequences for either party. We look at the most common retention tools that employers might consider along with some alerts when using these incentives.

 

Incentives are variations to the employment agreement

All incentives are a variation to your employee’s individual employment agreement. When considering any form of incentive, you must ensure that all changes are consulted on, and agreed to, by your employee. The agreed changes should be documented appropriately, usually with your lawyer’s assistance, and signed by both parties.

 

You must document and record all changes to employment terms and benefits. When employment variations are made and you don’t keep accurate records and act in accordance with those records, you are at risk of a personal grievance claim from your employee. In addition, inaccurate recordkeeping can attract penalties from the Labour Inspector for not complying with the Employment Relations Act 2000 and the Holidays Act 2003.

 

When considering an incentive for your employee, consultation regarding tax consequences, including fringe benefit tax (FBT), with your accountant or tax advisor is essential.

 

Cash and performance-based bonuses

The most commonly used, and arguably most straightforward tool to increase employee engagement and performance short-term, is a cash bonus. This payment can be made as a lump sum for existing performance, or it can be a bonus based on agreed and documented requirements for future performance.

 

If you pay a discretionary cash bonus, one costly mistake you could make is to unintentionally increase your employee’s ‘gross earnings.’ If a payment is not correctly identified as a discretionary additional payment, then the increase to their ‘gross earnings’ can also affect payment required for their other entitlements such as annual leave.

 

In landmark cases in 2020 and 2021[1], the court considered whether or not a bonus scheme was part of ‘gross earnings’ for an employee. Originally the bonuses were considered part of the ‘gross earnings’ and the company had to pay out significant additional annual leave entitlements. On appeal, this was overturned.

 

Ultimately, the court decided that a primary indicator as to whether a bonus counted as ‘gross earnings’ was whether the employer retained discretion to not pay the bonus, even if the performance targets had been met. Importantly, the law was clear that the payment needed to be a true ‘discretion’, and merely labelling or titling it as ‘discretionary’ did not suffice.

 

Being careful on how this payment is documented and ensuring it is ‘truly discretionary’ will help prevent unnecessary increased annual leave payments. If it is discretionary, you will need to ensure it’s recorded as such in your payroll system.

 

Retention bonus

Another common tool is a retention bonus where your employee is guaranteed a lump sum cash payment at the end of a retention period (often between 12-36 months).

 

All agreements should contemplate what happens if your employee decides to leave during their retention period. This could be a resignation, dismissal due to poor performance or, if the market required, your employee’s role/position may be made redundant. The nature of the event giving rise to the dismissal will likely determine whether the bonus is paid or not, and if paid, whether partially or in full.

 

Retention bonuses can also become payable on the occurrence of a prescribed event. Regardless of when payment is made, the impact on annual leave must be considered in the same way as for a performance bonus.

 

Bonding clauses

Another way to retain your employees is to provide payment for further education or formal qualifications in exchange for your employee staying for a period of time after the training or further education has been completed. If your employee leaves, they might be asked to repay some, or all, of the training costs covered.

 

While bonding clauses can increase employee engagement as well as enhancing the value of your employee to your business, when considering bonding clauses you should seek specific legal advice to ensure the bonding clause is enforceable. The enforceability is dependent on many factors including fairness to your employee. If the bonding clause is deemed to be unfair, you may not be able recover the training costs already paid when your employee leaves earlier than their bonded term.

 

Shares or equity in the business

One of the most effective long-term retention tools for key employees is to offer shares in the business. These shares can be restricted so that the value the employee receives for the shares is minimal if they leave within a prescribed period. If they stay longer than the prescribed period, they can sell the shares for their actual value. This is an excellent tool as not only does it provide a good incentive for your employee to stay, but it also incentivises them to grow the value of the business during their tenure.

 

This process should always be guided by your lawyer; there are several steps and the requirements will be unique to each business. For new shareholders, a shareholders’ agreement should be prepared that covers all shareholder rights such as pre-emptive rights for the majority shareholder (the main business owner) to buy back the shares and voting rights of all the parties. Often this process will require a valuation of the business, and there will be significant considerations regardless of the structure implemented.

 

Meeting the market

Looking at the wider labour market and demands for particular roles will help you identify employees who are most at risk of leaving. Often, if employees are in short supply, the market remuneration will have increased and you should consider meeting the market rates to reduce staff temptation to leave.

 

Other incentives that can make an employer competitive are increased annual leave, wellbeing payments, health insurance, allowing personal use of work phones or vehicles, flexible working and interest-free or low interest loans (some of which have FBT consequences).

 

Have a highly engaged culture

Ultimately, retaining staff is a complex area that involves much more than just financial incentives. Ensuring your workplace has developed a highly engaged culture that supports your employees’ individual needs and that your employees feel valued will all help with your overall retention strategy.

 

With the rapidly changing employment market it can be understandably challenging to retain key staff. If you have an employee you think you are at risk of losing, think about what retention tools will mean the most to that person; and remember to talk with us about what steps you should take before offering any incentives.

 

[1] (Metropolitan Glass & Glazing Limited v Labour Inspector, Ministry of Business, Innovation and Employment [2020] NZEmpC 39 and subsequent appeal of that decision in Metropolitan Glass & Glazing Limited v Labour Inspector, Ministry of Business, Innovation and Employment [2021] NZCA 560).

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

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