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Commercial

Contract compliance

Commercial, First Job, Your Own Business
0

Fair Trading Amendment Act 2021 now in force

 

If you have customer contracts, inter-business contracts or contracts valued under $250,000, the Fair Trading Amendment Act 2021, that updated the Fair Trading Act 1986, should be on your radar. The changes came into effect on 16 August 2022.

 

Unfair terms, unconscionable behaviour and direct sales are all targeted in the updated legislation that includes an expansion on the regulation of ‘unfair terms’ impacting all consumer contracts and standard, trade and small contracts. This means all businesses should be reviewing these changes to ensure they comply with the 2021 Act to avoid penalties.

 

In this article, we focus on the ‘unfair’ contract term changes as these will impact almost all businesses.

 

What is an ‘unfair’ contract term?

Contract terms that are now considered ‘unfair’, and therefore unenforceable, are any terms that meet all of the following requirements:

 

  • The contract or term causes a significant imbalance in the parties’ rights and obligations arising under the contract
  • The term is not reasonably necessary to protect the legitimate interest of the party who is advantaged by it, and
  • The term would cause detriment (financial or otherwise) to a party if it were applied, enforced or relied upon.

 

There are a few exemptions to the above requirements, including where the contract specifies a transparent price term, upfront price, defines the main subject matter of the contract or is expressly permitted by another law.

 

Examples that could be considered unfair include terms that:

 

  • Refer to other hidden or ambiguous terms and conditions, such as committing your customer to ‘standard terms that will be provided with the supply of goods’
  • Prevent someone from taking legal action
  • Give one party a unilateral ‘final decision’ status
  • Make your customer bear all the risk
  • Restrict your customer from transferring their rights under the contract (i.e.: non-transferable), and
  • Allow you to transfer your contract without their consent.

 

If it is unclear whether a term is ‘unfair’, the Commerce Commission can make that determination or ask the court to do so. In making its decision the Commission or court is required to consider any matter it considers relevant; the two most important matters are, however, the contract as a whole and the unfairness of the term.

 

Does this apply to your contracts?

This legislation applies to a vast number of contracts including consumer contracts, standard contracts, in trade contracts and small contracts. While most people understand that a consumer contract is one engaged between a business and a customer, to properly understand if any of the contracts you use in your business come under this legislation, it is important that three key terms – ‘standard’, ‘in trade’ and ‘small’ – are clarified.

 

Standard contract 

A ‘standard contract’ is any contract in a templated form. This template is not subject to negotiation and is more of a ‘tick box’ of a contract. Most terms of trade and standard issued terms and conditions would be considered a ‘standard form contract’.

 

In trade contract

Using an ‘in trade contract’, you or your business must undertake any trade, business, industry, profession, occupation, activity of commerce or undertaking related to the supply of goods, services or interests in land.

 

Small contract 

‘Small contracts’ are contractual business relationships that result in less than $250,000 in anticipated value in the first 12 months of the relationship.

 

In addition, and importantly, almost all independent contractors will be caught up in these changes. Contractors should review their agreements to ensure they remain compliant with the legislation.

 

Penalties

If your contract, or terms of trade, is considered unfair, a court may determine any number of remedies should be applied including:

 

  • Removal of the clause
  • Refunding money or pay damages
  • Preventing the business from using the clause in any way, and
  • Fines of up to $200,000 for an individual or $600,000 for a company or body corporate.

 

If a clause is considered unfair in a standard contract, there is a risk it could extend to all the contracts issued by your business and every consumer or business negatively impacted by that clause could be entitled to a remedy.

 

The new law reflects the reality that many small businesses are sole traders or small family-owned businesses that require more protection from unfair contractual terms than large corporations. On the flipside, it also means all businesses should take additional care to ensure their contractual terms are fair and reasonable, and comply with the legislation.

 

If you are uncertain if your contracts are compliant or would like to discuss this change, please 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

Hybrid working

Commercial, First Job, Health Issues, Your Own Business
0

Now an option for many employees

 

The Covid pandemic has reshaped the way New Zealanders work. Southern Cross Health Insurance conducted a nationwide survey[1] for its Workplace Wellness Report 2021 and found that since the Covid outbreak in 2020, 34% of businesses surveyed have changed their position on remote working and now offer it as an option to employees.

 

AUT Business School Professor Jarrod Haar[2] has monitored the New Zealand workforce since February 2020 and, as of November 2021, 48% of Kiwi workers were engaged in hybrid working. It is likely the percentage of hybrid workers has increased since the AUT study.

 

As hybrid working appears to be a fixture in the employment landscape, what are the benefits of hybrid working and why are so many employers agreeing to opt into this flexible working regime?

 

Benefits of hybrid working

Hybrid working provides a great deal of flexibility for both employees and employers. A worker who feels tied to their desk all day may feel overwhelmed and stressed by their inability to tend to at-home tasks. Hybrid working provides employees with more flexibility which directly correlates with efficiency. AUT’s Professor Haar found hybrid workers had the highest scores of happiness and innovation compared with entirely remote workers and full-time office-based workers.

 

The government recently increased minimum sick leave entitlements from five to 10 days. This increase has allowed organisations to enforce strict rules around staying at home when their employees are unwell. In doing this, employers can protect both the people who are unwell and fellow colleagues from working with someone who is sick but doesn’t want to take the day off. Those people who do not want to take a sick day, but still feel able to work, can do so from home.

 

The Southern Cross report found that the year 2020 had the lowest rate of employee sick leave absences recorded by one of the Workplace Wellness Reports. It is interesting to note that the average number of days a manual worker took off was 5.3 days, whereas a non-manual worker, who could work remotely, took 3.4 days off on average, indicating those who could work from home would work instead of taking a day of sick leave.

 

Disadvantages of hybrid working

There are, however, disadvantages that come with working remotely. The Southern Cross report stated that 73% of the organisations surveyed reported that some of their employees felt isolated when working at home and preferred to be in the office environment. This percentage increases in smaller businesses with fewer than 50 staff members.

 

Remote working can have an impact on team culture, feelings of connectivity and collaboration between colleagues in a workplace. Many employees enjoy their workplace not only because of the work they do, but also the people they work with.

 

Many new initiatives and problem-solving exercises happen in the office through collaboration. Although colleagues can communicate with each other via Microsoft Teams or Zoom, these platforms do not have the same benefits of interacting with an office colleague.

 

Communicating via an online platform can also result in smaller questions being brushed under the rug, due to the effort involved and fear of having to call and ‘interrupt’ a colleague to ask a question.

 

Health and safety considerations

The Health and Safety at Work Act 2015 requires employers to ensure the health and safety of all their workers, so far as reasonably practicable. If your employee is working from home, their home becomes a workplace and is subject to health and safety requirements. Relevant considerations include:

 

  • Ergonomics: desk workers who spend most of their day sitting are prone to strains and injuries relating to posture. Not having the correct equipment when setting up a home office is one of the biggest contributing factors.
  • Hazards: employees should be warned about hazards around the home including overloading power sources and confined work environments which may lead to tripping over cords and so on.
  • Mental health: employers’ health and safety obligations extend to mental wellness, not just physical wellbeing. A worker’s mental health can be difficult to assess if they are at home and out of sight. Personal and work boundaries can become blurred leading to overwhelming feelings of stress.To address this, workers should be encouraged to use a specific area of the house for work and shut off that area when they finish for the day. Alternatively, workers could be encouraged to wear ‘work’ clothes during work hours, and they can change into more casual clothes to mentally separate themselves from all work associations.
  • Confidential information: the obligation to ensure employer information remains confidential is still applicable; it is probably more heightened working from home. Hybrid workers should be reminded of their obligations and advised to be particularly diligent when dealing with confidential information at home; provisions should be included in policy documents to this effect.

 

The way of the future

It is clear hybrid working is the way of the future. Although there are some disadvantages in working this way, these look to be outweighed by the vast number of benefits, including overall increases in a worker’s happiness. The key is finding the correct balance and ensuring there are days that all staff are in the office together so everyone can get the best of both worlds.

[1] PowerPoint Presentation (businessnz.org.nz)

[2] Happy workers are hybrid workers – News – AUT

 

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

Greenwashing

Commercial, News, Your Own Business
0

‘Green’ credentials are good but take care

The Sustainable Business Council ‘Better Futures 2022’ report[1] surveyed New Zealanders and identified that more than 43% of Kiwis are committed to living a sustainable lifestyle; this is a continuation of an upward trend over the last three years. Given the public’s motivation to be more sustainable than ever, businesses are honing their marketing strategies towards environmental sustainability.

 

Making any form of environmental claim in marketing is known as ‘green marketing.’ Making an environmental claim that is misleading, false or unsubstantiated is usually referred to as ‘greenwashing.’ It is not a new concept but, given the increasing number of Kiwis wanting to make environmentally sustainable decisions, the desire to market products and services in a green way continues to increase. However, if any such claims are not substantiated, an advertiser may inadvertently cross the line between green marketing and greenwashing.

 

Responsibility for preventing greenwashing falls to a number of different regulatory bodies in New Zealand. These include:

  • Commerce Commission that, amongst its many roles, takes action to enforce the Fair Trading Act 1986 by taking breaches of the legislation to court
  • Advertising Standards Authority for breaches of the Advertising Standards Code, and
  • Financial Markets Authority through its enforcement of the fair dealing provisions of the Financial Markets Conduct Act 2013 and its support of New Zealand’s transition to an ‘integrated financial system.’ This not only takes into account financial returns but also non-financial factors such natural, social and human capital impacts.

 

Greenwashing with words

Expressly making environmental claims, or using words to imply a certain environmental attribute, that do not exist is a mistake a business could easily make. Regardless of whether this is unintentional, using words such as ‘eco’, ‘organic’, ‘natural’, ‘green’, ‘plant powered’, ‘non-toxic’, ‘plant based’, ‘zero waste’, ‘recycled content’, ‘compostable’ and many more can all be examples of greenwashing unless the words are completely truthful, substantiated and not misleading in any way.

 

For example, if packaging says a product is ‘recyclable’, but can only be recycled at recycling centres in a limited area, or by returning the packaging to the manufacturer, this may be considered greenwashing. Similarly, if packaging says ‘compostable’ and does not specify under what kind of composting environment it will break down; it may amount to greenwashing and a misleading environmental claim.

 

Greenwashing imagery

Even if a business avoids using any ‘green’ terms but uses imagery that implies some environmentally friendly attributes, that could be considered greenwashing. The most common examples of using images for greenwashing are the use of the three green arrow recycling logo, an image of the earth or a green tick. These may be easy enough to justify, but a business could still be found to be greenwashing for using images of flowers and trees if those images lead a consumer to believe the product has environmentally friendly qualities that it does not have.

 

Deliberately misleading statements

Any false environmental related statements are obvious greenwashing, for example, if a product is labelled ‘organic’ or ‘plant based’ if it is not made with organic material or plants. What is trickier though, is making statements that aren’t technically false, but the unique combination of marketing features could lead a consumer to an incorrect conclusion about a product.

 

A recent example is a case[2] of a smallgoods producer that used the phrase ‘100% NZ owned’, along with imagery of farms and a rural address for the business. This company was found liable for greenwashing because its pork products comprised 87% imported meat, but the marketing led consumers to reasonably believe the pork was New Zealand-reared. The company was fined $180,000 for this breach despite each marketing element being truthful; the company was 100% New Zealand owned and the rural farm address was a genuine address for the business. Businesses, however, cannot ‘hide’ behind each statement being truthful if the combined elements together lead a consumer to a misleading conclusion.

 

Tips to avoid greenwashing

Avoiding greenwashing is a case of stepping into the shoes of a consumer to assess whether any of the marketing elements could potentially be interpreted to give the product more environmentally friendly attributes than it truly has. Before finalising packaging or marketing, business owners should ask themselves if the marketing is:

  • Honest
  • Specific
  • Substantiated
  • In plain English
  • Not exaggerated, and
  • Not misleading in its overall impression.

 

It is also important there are frequent branding and marketing checks, particularly if there is a comparative claim. A good example is making a claim that a product is ‘recyclable’; that may be considered greenwashing if the ability to recycle that product is not commonly available through local council recycling services.

 

Keeping business honest

Anyone who identifies greenwashing, or wants a greenwashing claim investigated, can report suspected cases to the Commerce Commission, Advertising Standards Authority, Financial Markets Authority or another relevant regulator or industry body.

 

In the case of a complaint made to the Commerce Commission, depending on the severity of the alleged greenwashing, the Commission can either choose to disregard the report, investigate further, or issue a warning or a ‘compliance advice’ letter. In significant cases it can take the company or individual responsible for the alleged greenwashing to court for a breach of the Fair Trading Act 1986. The penalty for failing to ensure environmental claims are truthful and substantiated can be up to $600,000 for a company and $200,000 for an individual.

 

Sue me!

Even if the Commerce Commission or other regulatory body decides not to pursue a company for greenwashing, a competitor may choose to sue privately for misleading statements that may amount to greenwashing.

 

A private claim has been filed by United States-based carpet making giant Godfrey Hirst against New Zealand-owned carpet company Bremworth. In 2020, Bremworth announced that it was moving to 100% wool fibre production. In its marketing campaign, Bremworth made a number of claims about the benefits of wool over synthetic carpets. One such claim was that the weight of a nylon carpet in an average size home was similar to 20,000 plastic bags. Godfrey Hirst, that manufactures nylon carpets (amongst other types of carpet), claims this is misleading as the consumer is led to believe its nylon carpet has the same environmental impact as 20,000 plastic bags. Bremworth stands behind its statements as being factually correct; the two companies remain in costly ongoing litigation.

 

Care is needed

We can reasonably expect that, given the focus on environmentally conscious decision-making by the New Zealand public, green marketing will continue to rise and, along with it, instances of greenwashing. Business owners keeping a careful and critical eye on marketing will help both the consumer make a considered and informed choice, and ensure the business does not succumb to greenwashing.

 

The Commerce Commission has guidelines on greenwashing: go to www.comcom.govt.nz and search for ‘greenwashing.’

 

If you would like help with reviewing marketing claims for your business or would like more information on greenwashing, please contact us.

[1] https://sbc.org.nz/resources/better-futures-2022-report/

[2] Commerce Commission v Farmland Foods Ltd [2019] NZDC 14839

 

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

Postscript

Commercial, First Job, News, Your Own Business
0

Fair Pay Agreements legislation passed

The new Fair Pay Agreements Act 2022 worked its way quickly through the House and comes into effect on 1 December 2022.

 

The government’s objective is to provide a framework for collective bargaining of pay agreements. It stated that the legislation will improve employment conditions by enabling employers and employees to bargain collectively (by occupation, for example), rather than on an individual basis.

 

The Minister for Workplace Relations and Safety, the Hon Michael Wood said, “By increasing bargaining coordination to agree minimum employment terms within a sector, outcomes for vulnerable employees will be improved and we will see growth in the incomes of New Zealand employees. This is especially the case for Māori, Pacific peoples, young people and people with disabilities who are over-represented in occupations which will benefit from a Fair Pay Agreement.”

 

As we noted in the Winter 2022 edition of Fineprint, the provisions in this legislation have been welcomed positively by unions although not so warmly by many employers.

 

If you would like help in any pay negotiations, please don’t hesitate to be in touch.

 

Some plastic products now banned

Since 1 October 2022 it became illegal to provide, sell or manufacture the following plastic products in New Zealand:

  • Single use plastic drink stirrers
  • Single use plastic cotton buds
  • Degradable plastics such as oxo and photo degradable (such as some dog poo bags)
  • Certain PVC food trays and containers
  • Polystyrene takeaway food and beverage packaging, and
  • Expanded polystyrene food and beverage packaging.

These new regulations may affect the way you do business. To find out more, go to www.environment.govt.nz and search for ‘plastic phase outs’ and scroll to the end page.

 

 

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

Business briefs

Commercial, First Job, Health Issues, Your Own Business
0

Hiring migrant workers: What the new AEWV means for you

Immigration New Zealand (INZ) has introduced the Accredited Employer Work Visa (AEWV) that replaces and consolidates six temporary work visas.

 

Employers must now apply for accreditation to hire migrants under the AEWV pathways by showing they are a good employer who will:

 

  • Run a viable, genuine business which meets certain financial criteria
  • Comply with New Zealand employment and immigration law
  • Commit to pay all recruitment fees, and
  • Assist the migrant with settling in New Zealand.

 

Once accredited, you (as the employer) can apply to INZ for ‘job checks’ and, in doing so, must provide evidence that:

  • You have recently advertised the role on a national job listing website for at least two weeks to determine whether any suitable New Zealand candidates exist
  • The job meets INZ’s requirements, and
  • You have provided an acceptable offer and an employment agreement to the applicant.

 

If INZ grants the job check, the relevant role must be filled within six months, or you will have to reapply. INZ will then add the relevant migrant’s details into Immigration Online and send the AEWV applicant a unique link to apply for their visa.

 

If you have any questions about the AEWV or the accreditation process, please don’t hesitate to contact us or an immigration advisor.

 

Changes to the Holidays Act on the horizon

For many employers, the Holidays Act 2003 is a constant source of frustration, especially when it comes to calculating pay for annual leave or days in lieu. Getting these calculations wrong, or failing to meet the requirements of the Act, can result in tens of thousands of dollars’ worth of penalties for serious breaches.

 

The government has signalled upcoming changes to streamline and simplify compliance, hopefully coming in 2023, including:

 

  • Annual leave payments will be calculated based on the hours in the employment agreement, or averaged over the previous 13 weeks
  • Employees will be entitled to take annual leave in advance, including during their first 12 months of employment
  • Eligibility for alternative holidays will be based on whether an employee worked more than half of the corresponding days over the previous four or 13 weeks (e.g.: if the public holiday is a Monday, the employee must work more than half of the previous four or 13 Mondays to qualify for an alternative holiday)
  • ‘Casual employee’ will be defined for the first time
  • Only casual employees will be eligible to be paid 8% ‘pay-as-you-go’ holiday pay, and
  • Employers will be required to provide pay slips to their employees each pay period.

 

These proposed changes look very promising, but the current laws will still apply to the upcoming Christmas and summer holidays. Until the changes take effect, all employers must ensure they are compliant with current law.

 

FMA review of ethical investing highlights need for improvement

The Financial Markets Authority (FMA) is urging fund managers to improve disclosures relating to ethical investing after a recent review found that, despite growing demand, New Zealand investors struggle to select managed funds based on ethical and socially responsible credentials.

 

Based on the review, New Zealand investors will be keen to monitor fund managers’ responses to the FMA’s recommendations. The FMA recommends that fund managers should consider the following:

 

  • Consolidating disclosures relating to ethical investment practices into an easy-to-read format that investors can easily understand
  • Clearly explaining the criteria used to exclude investing in certain companies or sectors
  • Providing better information to investors about risk and return trade-offs, and the benefits of the fund. One suggested example is to avoid using vague terms such as ‘the fund’s returns will be financial and a reduced climate impact’
  • Ensuring the non-financial outcomes are meaningful, and clearly state the consequences of failing to achieve them, and
  • Ensuring investors better understand the purpose and value of organisations providing assurance, measurement standards or endorsement, such as the Responsible Investment Association of Australasia.

 

The FMA’s review highlights the need for fund managers to provide a greater level of detail and clarity in disclosures to support their ethical investing claims. If you would like to read the review in full, please click here.

 

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

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