Edmonds Judd

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Bonding agreements

Helping employers recoup training costs

Bonding agreements can be an incredibly useful tool for ensuring employers can recoup costs incurred for training staff.

Used improperly however, bonding agreements may be unenforceable and – in some circumstances – be a clear breach of the Wages Protection Act 1983 (WPA). We look at two of the most common issues with bonding agreements as well as what should be considered for enforceable agreements.

What is a bonding agreement?

A bonding agreement is a benefit given to an employee where you agree to pay for some or of the all the cost of further training in exchange for your employee agreeing to stay under your employment for a period of time; this is usually around one to two years after the training is complete. The result is an upskilled employee who has better qualifications and future employment prospects, and your business has the benefit of a more valuable employee who usually will stay for the period of the bonding agreement.

These arrangements can be recorded in the original employment agreement or in a subsequent document both the employer and employee sign which records the bonding agreement as a formal variation to the employment agreement that is already in place.

Wages Protection Act 1983

Section 12A of the WPA states that an employer may not ‘seek or receive any premium’ for employing a person. In a 2016 case[1], it was found that bonding employees to recoup recruitment costs, such as skills testing, was considered a breach of s12A as it was the employer who primarily benefitted, not the employee. Any bonding agreement for training, testing or costs incurred by the employer only would likely

be considered a breach of the WPA.

Workplace health and safety

All employers are responsible for ensuring that they provide a safe environment for their employees. For most businesses this means that, at a minimum, each workplace must have some staff trained in first aid. In more dangerous workplaces there must be additional measures, such as training employees in handling combustible materials or dangerous goods.

As an employer, if you have insufficient staff members trained in workplace safety and are required to provide training to up-skill existing staff in this area, it is unlikely that you could use a bonding agreement to recoup the cost of that training, as it is your responsibility to provide a safe workplace in the first instance. If any additional training goes above and beyond the requirement for safety, and significantly improves your employee’s future employability, a bond may be valid.

Making clauses work

There are many circumstances in which bonding agreements are appropriate and enforceable.

When considering a bonding agreement, the following three basic principles are a good guideline.

  1. Mutual benefit: the additional training being undertaken by your employee must be of a mutual benefit to you both. Another acceptable, but rare, situation is where the additional training is of sole benefit to your employee, such as up-skilling in a different field while continuing to work in the current role.
  2. Transparency of cost: costs should be agreed as much as possible up-front, including how and when those costs will be repaid if your employee leaves during the bonded term. If the costs cannot be recorded clearly in the agreement, for example accommodation costs while on training, your employee should be given reasonable notice of the cost before it is incurred and the opportunity to opt out or for you both to choose a cheaper alternative.
  3. Reasonability: the bonding term and repayment schedule should be reasonable in consideration of the costs incurred by the business. For the majority of bonding terms, a reasonable timeframe is somewhere between six months and two years, though there are certainly some circumstances where longer bonding terms are appropriate.

Like many elements of employment law, bonding agreements are very case specific. This means that in this article, we cannot cover all the issues that arise with them. Any issues in the workplace such as harassment or constructive dismissal can shake the foundation of a bonding agreement. Even when an agreement is considered enforceable, there is no guarantee you will be able to recover the funds from an employee who leaves your business.

If you are considering a bonding agreement, whether you are an employer or an employee, please contact us to discuss your specific needs.

[1] Labour Inspector v Tech 5 Recruitment Limited [2016] NZEmpC 167 EMPC 114/2016.


Climate Action Toolbox

We all need to do our bit to reduce carbon emissions and look after the planet better than we have previously

In late March, the Climate Action Toolbox was launched in a major collaborative effort involving the Sustainable Business Network, a number of government agencies and some private sector businesses.

The Climate Change Commission had identified a need for tools to help smaller businesses take action on climate change. Its goal is to help businesses create a tailored step-by-step plan they can use to reduce emissions.

Many small to medium-sized businesses want to do their bit, but are unsure on how to start or what could make the most impact. The Climate Action Toolbox provides tailored advice and support around moving people, moving goods, office operations, site operations and equipment, and designing and making products.

Businesses can work through a self-assessment to identify which areas are relevant to them. Under each area you can choose from a range of specific actions to improve the climate impact of your business. Activities range from limiting non-essential travel, using heating and cooling options efficiently, buying sustainable products, recycling and reducing what goes to the tip, buying products produced locally, using equipment efficiently and upgrading to cleaner technology where possible.

To find out more about how your business can reduce its carbon footprint, go here.


Post-Covid working world

Keep employment agreements and policies up-to-date

Over the past 18 months, we have seen significant changes to employees’ hours of work, rates of remuneration and the expansion of flexible working arrangements as businesses have adapted to the Covid economy.

With most sectors of our economy recovering, and despite some occasional changes in alert levels, both employers and employees should ensure that any agreed post-Covid terms of employment or changes to the workplace are accurately recorded in their employment documentation.

Changes to hours of work and remuneration

In 2020, a significant proportion of businesses reduced their employees’ hours of work and rates of remuneration in response to the economic impact of Covid and claimed the government wage subsidy.

While many employees have returned to their previous hours and rates of pay, there is still a significant number who have not. It is important that employees’ rates of pay and hours of work are formally recorded; this will help avoid uncertainty and clarify how long the new hours/pay are intended to stay in place. The best way to achieve this is to prepare a variation letter for them to sign and return. This sets out an employee’s new hours of work and/or remuneration. They should of course seek independent legal advice.

Working from home

Covid has been extremely disruptive to our traditional ideas of what it means to be ‘at work’ and has been a catalyst for many businesses to introduce, or expand, flexibility for their employees. The introduction of working from home means that your employee’s home should also be recorded as a place of work in their employment agreement. This re-classification, however, raises some other issues that should be worked through.

Health and safety is important. For home-based workers who can perform their roles remotely, the main issue is whether their home is adequately set up to be a place of work. For example, are their desk, chair and computer screens ergonomically correct? If not, you should consider whether your business is prepared to subsidise or cover the cost of purchasing this furniture.

We recommend you consider whether the health and safety provisions in your employment agreements are fit for purpose in light of your employees’ homes being treated as a place of work.

Another issue is working from home expenses, such as internet and phone usage. You may wish to consider whether a weekly/fortnightly allowance is appropriate to subsidise employees’ expenses when working from home. Tax consequences will also need to be taken into account.

You will also want to ensure that sensitive business information remains confidential despite being in your employee’s home, and to ensure you have policies in place to address these issues.

What ‘flexible working’ looks like for a particular workplace is a major consideration. While many employees appreciate the flexibility that comes with working from home, you must take into account how allowing a large proportion of staff to work that way impacts your workplace culture and cohesion.

We recommend employers consider introducing flexible working policies in consultation with their staff in order to identify how often their employees can work from home and the rules and expectations around how they will stay connected while they are out of the office.

Overseas travel

With travel bubbles open (and sometimes closing) with Australia and the Cook Islands, both employees and employers must be mindful of the possibility of employees being unable to return from overseas trips due to unanticipated Covid outbreaks.

Employers should develop overseas travel policies, in consultation with staff, to establish the process for authorising or declining an overseas travel request. If overseas travel is allowed, employers should consider whether their employees should take their work computer with them (if they are capable of working remotely) so there would be minimal business disruption if they are unable to return for some time.

Final thoughts

Covid has thrown a spanner in the works in the way we carry out our day-to-day business. It has, however, given us all an opportunity to work in different ways. It is important to ensure your employment documentation reflects your workplace’s new normal.



Business briefs

Mainzeal: lessons for directors

Mainzeal Property and Construction Ltd was a New Zealand construction company placed into liquidation in 2013. The liquidators brought proceedings against the directors of Mainzeal, alleging a breach of directors’ duties, including reckless trading and allowing Mainzeal to take on obligations that the company could not perform. The High Court found the directors were personally liable for reckless trading. The decision was appealed to the Court of Appeal.

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Treat your friend as if he might become an enemy (Publilius Syrus, 85-43 BC)

Social media is a very powerful marketing tool. If used and managed properly, platforms like Facebook, Instagram and Twitter can be a brand’s best friend.

If not managed properly, however, social media platforms can be a brand’s enemy. They can, at least temporarily, impede growth and — in the most extreme circumstances — cause significant damage to brand reputation.

In the context of intellectual property (IP) rights, whether social media platforms are your friend or foe depends on two factors:

  • How you manage the IP rights of your own business, and
  • How you treat the rights of others.

In this article, we focus on the two IP rights that feature most prominently in social media marketing – copyright and trade marks – and how these should be managed on social media.

Copyright – be vigilant

The IP right that is probably the most often complained about in social media is copyright.

Copyright rights arise automatically on the creation of an original copyright work. ‘Original’ means the product of more than minimal time, labour, skill and judgement and not copied from someone else’s work; it doesn’t mean ‘brand new’ or ‘novel’. The threshold to achieve ‘original’ status is low.

Copyright works include logos, photos, images, paintings, illustrations, sound recordings and films — all of which are used extensively on social media.

Quite often, copyright works are used on social media without a copyright owner’s permission. Businesses — from sole traders to large corporates — should be vigilant to ensure their copyright rights are not being infringed.

If you see unauthorised use of your copyright material on a social media platform, you should contact the infringer immediately asking them to stop and remove the posts.

If this is unsuccessful, or you are not comfortable with contacting the infringer directly, you should ask your IP specialist to send a strongly worded letter. If there is no response or action to that letter, you can make a formal complaint to the platform on which your copyright is being infringed.

The online complaint forms used by Facebook and Instagram, for example, require you to provide them with details of your copyright work (what type it is — photo, video, artwork, software, logo, etc.) and links to where the copyright work can be publicly seen. If the copyright work isn’t viewable online then you have to describe the work in detail or attach an authorised example. Without this information, the platforms cannot assess your complaint.

In cases involving photos, videos, artwork and logos businesses should be able to readily provide evidence of their rights to the platforms. In other cases, it could be more difficult to describe the copyright work or provide the requisite evidence.

It may be that you don’t want to provide a copy of your copyright work to Facebook; for example, if your complaint relates to infringement of copyright in confidential product drawings by a New Zealand competitor. In this case, the last thing you want to do is disclose your copyright works. However, enforcing your rights directly against an infringer to avoid the requirements of a formal complaint process may be difficult as the infringer could be based overseas or may not be locatable at all.

The bottom line is that if you can’t meet the platform’s requirements to prove copyright infringement you risk your complaint not being upheld and the unauthorised use of copyright material continuing.

Trade marks — be registered

Rights in a trade mark can be acquired through registration and/or use.

In the social media arena, registration of your trade mark is particularly important. Enforcing rights in unregistered trade marks on social media platforms is extremely difficult as these platforms do not recognise unregistered trade mark rights.

As a general rule, a business’s principal trade mark/s — usually a name and/or logo — should be registered for a number of reasons; the two main ones being:

  1. It is the best form of protection against unauthorised use of your trade mark. As registration is a matter of public record, anyone thinking of registering or using an identical or similar trade mark to yours can easily check to see if they can (or cannot)
  2. It provides a readily identifiable, nationally-recognised business asset — unlike the situation with unregistered trade marks where owners must provide evidence of use to establish their rights and where rights are often locally or regionally limited in scope.

A registered trade mark not only gives your trade mark better IP protection, but it is also more attractive to investors and potential buyers of your business than an unregistered trade mark.

If you see unauthorised use of your trade mark on a social media platform, then as with copyright infringement you should contact the infringer immediately asking them to remove the references or posts.

If this is unsuccessful, or you are not comfortable with contacting the infringer directly, then again you should ask your IP specialist to send a strongly worded letter. If that doesn’t work, make a formal complaint to the platform on which the infringement took place.

The online complaint form used by Facebook and Instagram, for example, asks you to provide registration details such as the country or countries in which your trade mark is registered, its registration number and the categories of goods and/or services covered by your registration. You are also asked to upload a scanned copy of your trade mark registration certificate/s or a screenshot of the registration on the website or database of the applicable national or community IP office/s; in New Zealand, this is the Intellectual Property Office of New Zealand. If your trade mark is not registered, you cannot complete the form.

The need for your trade mark to be registered is reinforced, for example, by Facebook’s Commerce & Ads IP Tool which gives users the ability to search ads, marketplace posts and group sale posts and report content that the user identifies as infringing their IP rights. Access to the Tool is not automatic though.

IP rights owners must apply to gain access using Facebook’s online form — which requests much of the same information as the trade mark complaint form.

In short, if you don’t have a registered trade mark you will face an uphill battle convincing a social media platform to uphold your complaint.

Parting thoughts

If you actively use social media to market and promote your business, do treat social media cautiously. If you haven’t already done so, register your principal trade marks and maintain a vigilant eye for any infringement of your copyright rights.

Copyright infringement by former President Trump’s team

An example of copyright infringement that hit the news in mid-2020 was the use on Twitter of a cover of Linkin Park’s 2002 song ‘In the End’ in a campaign advertisement released by former President Trump’s team. The video advertisement, originally posted by White House social media director Dan Scavino, was later retweeted by the former president.

On 18 July 2020, Twitter removed the advertisement following a formal takedown request by Machine Shop Entertainment, Linkin Park’s business arm and management company.


Some practical tips

You arrive at work to find that files with sensitive commercial and client information held on your computers have been hacked. This is the situation the Reserve Bank of New Zealand (RBNZ) found itself in earlier this year. In January, the RBNZ encountered a data breach of its global file-sharing application Accellion FTA. This application was once used by the RBNZ and its stakeholders to share personal and commercially-sensitive information.

It is alarming to contemplate having to negotiate with hackers who have stolen your business information for ransom. All businesses can learn from the RBNZ’s incident to increase awareness of cyber security and minimise the risk of a hacker attack. Prevention is the best solution.

Install antivirus software

Antivirus software helps detect, quarantine and remove malicious software from computers. Although Windows 10 comes with Windows Defender built-in, this only provides a baseline level of protection. Hackers are constantly inventing new viruses and threats, and it’s important to have up-to-date antivirus software. It’s worth paying for reputable antivirus software; free antivirus software programs can be fake and/or harbour viruses.

Use a virtual private network (VPN)

If you connect a device to free public Wi-Fi networks at, say, local cafes, you’re running a business risk. If hackers access that network, they can see everything you do on the internet, including logins and passwords. A VPN helps to protect you from these risks. A VPN provides online privacy, anonymity and security by creating a private network connection. Like antivirus software, it is worth paying for VPN software to ensure you receive a higher quality product.

Implement patch management

Patch management ensures that all operating systems and software on your business computers are up-to-date so the likelihood of a known security risk being exploited on your computers is reduced.

Although it is tempting to delay notifications that say ‘Windows needs to restart your computer to install the latest update’, installing those updates is critical to maintain security.

Older operating systems such as Windows 7 are easier to hack than the later version (Windows 10) because Microsoft no longer provides updates and support has ended. As a result, there are known security vulnerabilities which have not been fixed.

Regularly back up data

Your IT systems, including all data, should be backed up to a secure location, so that business can be restored quickly if it is cyber-attacked or there is another data loss event. Typically backup and business continuity plans are developed to ensure downtime is minimised. Often this will include backups taken at multiple times on any given day and at day end, and stored in multiple locations. Backups should be held for a reasonable period to avoid replicating viruses or other harmful codes.

Implement email filtering system

Emails are a big threat to cyber security. An email can purport to be from a genuine company but have fake credentials, could have been compromised by a hacker or have malicious attachments.

Downloading such emails could give a virus access to your computer. It is advisable to prevent programs from being run inside email attachments without permission. Email filtering system features are available with some Microsoft products but you may need to ensure these are turned on.

Web filtering

This technology stops web pages from being accessed that are known to contain harmful or restricted content. Web filters rely on constantly updated databases that record websites known to be associated with harmful or restricted content.

Train your staff

Staff members should be trained on cyber-attack risk and its protection. Even with the best measures in place, staff can unwittingly present security risks, such as clicking on email attachments from spam emails.

Don’t forget the basics

It’s easy to forget IT fundamentals. Have a screen lock. Create a complex password; ensure it is different for each account and change it frequently. Install two-Factor Authentication (2FA) that adds an extra layer of security by requiring users to provide two layers of information to gain access to a computer or network (such as inserting a password as well as code texted to your mobile phone).

Have an IT adviser

Unless your core business is IT, employ (or have on call) an IT adviser who can assess the risks to your business and implement the above steps. We also recommend you engage them periodically to undertake audits and to expose any weaknesses before a cyber-criminal exploits them.

Protect your business

Cyber security and cyber threats are now global problems. Failing to put in place measures to protect your business from these threats can easily lead to business failure. It should be a priority in your business planning.


A variety of clauses to suit different situations

Negotiating commercial leases can involve a significant amount of crystal ball gazing – particularly when some leases can last decades. As recent times have shown, the landscape at the start of a lease can be miles away from the situation at the end of the lease. One area where the shifting sands can bite for long-term leases are the rent figures. Without appropriate rent review clauses to adjust the rent, any landlord could find themselves with a vastly undervalued rental as the lease progresses.

Types of rent review

Not all rent review clauses are alike. There are various methods of calculating changes to rent, these include:

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Property Briefs

Is your property fully insured?

There are potential insurance risks for properties that have shared areas, for example multi-storey town houses, semi-detached homes which share a party wall, and cross lease properties which have carports, the Insurance Council of New Zealand has warned. 

If your property does not have a body corporate that manages insurance cover for the whole property, and if you and your neighbours have different insurance providers, you may find that any shared property such as carports, party walls and roofs will not be covered by your insurance.

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Some options for offering shares

The Covid pandemic has paved the way for innovation, and many New Zealanders spent 2020 investing time and money into their new or existing businesses.

When raising capital to grow their business, however, many business owners find themselves limited by the size of their wallet. While interest rates are currently at an all-time low, trading banks’ lending terms are arguably the strictest in recent memory.

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