Edmonds Judd

employment

Trial periods vs probation periods

Commercial, First Job, Your Own Business
0

Both are useful for employers

Many New Zealand business owners know they can offer a trial period (usually 90 days) when hiring a new employee. A trial period is designed to ensure a new employee is a good fit for their employer.

An alternative to a trial period is a probation period. This is designed to set expectations clearly between you and your employee including the terms of the hire and when a final decision about the suitability of their employment is decided.

We explain the differences between trial and probation periods to enable you to better understand your options.

 

Trial period

A trial period, if successfully included in an employment agreement, will allow you to terminate the agreement in the first 90 days of employment without your employee being able to raise a personal grievance for the dismissal. Trial periods can, however, only be used in limited circumstances.

Until 23 December last year, using a trial period was only available to employers who had fewer than 19 staff. Now, under the new coalition government, this limitation was removed and trial periods can be used by all employers, regardless of size, for new employees.

 

Key requirements of a valid trial period are:

  • Only for new employees, not current or prior employees
  • 90 days maximum length
  • Must be documented in the written employment agreement, signed before your employee starts work and must contain a valid notice period, and
  • Must only be included in the agreement and exercised in good faith.

 

When exercising a right to terminate under a 90-day trial clause, you are not obliged to provide any reasons for the termination. It is important to note that your employee can still raise a personal grievance against the business if there are other causes for grievance during their employment, such as (but not limited to) discrimination or bullying.

 

Probation period

Unlike a trial period, probation periods have a much wider application in employment law.  Probation periods are an ideal way for employers and employees to ‘try out’ a new or expanded role while setting clear expectations that this may only be a temporary employment change, and what to expect if it does not work out.

Some of the common reasons you may want to use a probation period include making sure a staff member is appropriately skilled for their role, or to allow an existing employee to accept a promotion or lateral move in the business and to show they can do the job.

Key characteristics of a valid probation period are:

 

  • Can be used for existing OR new employees
  • The probationary period can be for any length of time, as long as it is clearly defined in writing, is reasonable considering the role’s complexity, and has an appropriate agreed notice period
  • The written agreement includes what may occur at the end of the probation period (termination, reversion to their former role and responsibilities, etc), and
  • That you as the employer must provide adequate support and training.

 

Throughout the probationary period you must be able to show that you have taken reasonable steps to support your employee in achieving success in their role. This includes frequent performance-based conversations, providing adequate training and support on new skills and tasks, discussing any areas for improvement and setting clear expectations of what ‘success’ looks like for their role.

Unlike a trial period, if you decide at the conclusion of the period to terminate the employment agreement, you must explain how you have fairly assessed your employee’s performance, why their performance was not sufficient for the role and your intention to end the employment relationship.

Your employee must then have sufficient time to respond. Any response must be considered before making a final decision to terminate the employment agreement. Unlike a trial period, your employee can still bring a claim for unjust dismissal if they feel you have not followed due procedure and come to a fair conclusion.

It is also critical to note that probation periods cannot follow after a trial period for the same or very similar role. If your employee moves multiple times within your business, on each subsequent role change you may be able to apply a new probation period.

Regardless of whether you are considering a trial period or probation period, it is important you talk with us before incorporating it into your employment agreements. To be effective and defensible against a personal grievance, both trial periods and probation periods must be documented correctly throughout the period’s lifecycle, from the employment agreement pre-commencement all the way through to the end of the period. Please don’t hesitate to contact us if you are considering a trial or probation period for any of your employees.

 

 

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

Time changed to raise personal grievance for sexual harassment

Commercial, First Job, Relationships, Your Own Business
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Extended from 90 days to 12 months

The Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Act came into force on 13 June 2023. It has extended the timeframe in which a personal grievance (PG) can be raised when sexual harassment has occurred at work.

The timeframe now allows a PG to be raised within 12 months of the harassment occurring or coming to an employee’s attention, rather than the former period of 90 days. The purpose of this amendment is to allow sexual harassment victims more time to come to terms with what has happened before deciding whether or not to raise a PG.

Employment law fundamentals

Employment law in New Zealand is underpinned by the Employment Relations Act 2000; it promotes productive employment relationships and encourages employers and employees to act in good faith in all aspects of the employment environment. This is achieved by specific processes to help parties resolve employment disputes in a quick and flexible way, such as allowing an employee to raise a PG. A PG is a complaint that allows an employer and employee to address, amongst other things, a sexual harassment claim.

What is a personal grievance?

You may raise a PG against your current or former employer if you believe you have been treated unfairly or unreasonably. This includes situations where you think you have been:

  • Unjustifiably dismissed
  • Unjustifiably disadvantaged
  • Discriminated against in your employment
  • Sexually harassed in your employment
  • Treated adversely in your employment on the grounds of family violence, or
  • Racially harassed.

When deciding if an act or dismissal was justified, your employer, the mediator or the Employment Relations Authority must consider what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.

You can choose to raise a PG with your employer directly or via the Employment Relations Authority. To raise a PG, you have 90 days, or  12 months for instances of sexual harassment, from the date the action or dismissal occurred or from when you became aware of it. You can, however, raise a PG after the 90-day period has expired in other circumstances if your employer agrees.

Defining sexual harassment

Sexual harassment is unwelcome or offensive sexual behaviour that is either repeated or serious enough to have a harmful effect. It can be direct or indirect. Sexual harassment does not have to be physical; it can also be through written, verbal or visual materials/actions. You may only raise a PG for sexual harassment if it has occurred during the term of your employment. Sexual harassment is defined in sections 108 and 117 of the Employment Relations Act 2000.

Know your rights

It is important for both employees and employers to know their rights and obligations surrounding personal grievances. Employers should ensure their employment agreements are updated to reflect the above amendments.

 

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
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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

Keeping your employees during the ‘big quit’

Commercial, First Job, Your Own Business
0

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

Over the fence

First Job, News, Rural, Your Own Business
0

New minimum wage

From 1 April 2022, the minimum wage increased from $20.00 to $21.20/hour. If you haven’t already, you should review your employees’ pay rates to ensure you are compliant with the new minimum wage. For employees on a wage, this is a straightforward process as you only need to ensure that your employees’ wages are at least $21.20/hour. This is not the case for all employees, however, including those on a salary, as it makes it more difficult to calculate if their current pay rate is sufficient when they work overtime.

During busy times, such as the harvest and calving, salaried employees often work hours over and above their regular contract 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 this opportunity to ensure your time recording systems are accurate.

Vaccine mandate ends: how this will affect the rural sector

People employed in education, police, defence and hospitality are no longer required to be vaccinated to carry out their work. Employees in the health, aged care, corrections and border sectors, however, must still comply with vaccine mandates. Any terminations based on vaccination status made before these mandates were dropped are not unlawful, nor are there requirements to reinstate these past employees.

The rural sector is not directly impacted by these mandate changes. However, with many businesses having imposed mandates, they can still choose to implement their own vaccine mandates, but it must be implemented in accordance with a risk assessment.

It is important to be cautious when implementing a vaccine mandate as the case of Yardley v Minister for Workplace Relations[1] found that vaccine requirements for the police and defence force were unlawful and imposed on their right to refuse medical treatment. There is a risk that similar cases could be brought in other employment sectors. Therefore, it’s necessary to undertake a comprehensive risk assessment to determine if a vaccine mandate is required at your farm or rural business.

Vaccine passes are also no longer required for those entering a business. People coming on to farms are no longer required to prove their vaccination status. However, businesses can choose to keep this mandate in place.

Russia Sanctions Act: impact on the rural sector

The Russia Sanctions Act 2022 was recently passed to help combat Russia’s breach of international law and aggressive acts towards Ukraine. The Act came into force on 12 March 2022 and imposes sanctions on individuals and entities involved in the attacks on Ukraine. Sanctions may also be imposed for strategic purposes or to undermine Russia’s economy. The sanctions have extraterritorial application and target travel to and from New Zealand, and impose certain controls over assets and services connected to sanctioned entities. There is further detail in the Act’s accompanying Sanctioned Persons Schedule.

These sanctions are expected to have implications on both imports and exports. Russia’s top imports to New Zealand include crude petroleum oils and potassium fertilisers that are key resources used in the rural sector. It is anticipated that supply chain disruption, shortages in raw materials and fluctuations in prices will result.

Some corporates are also choosing to impose sanctions on Russia. Fonterra has announced it will exit its businesses in Russia and suspend all its exports to Russia. This may have implications for dairy farmers, but Fonterra has stated its exports to Russia total only about 1% of its annual exports (primarily butter).

[1] Yardley v Minister for Workplace Relations [2022] NZHC 291

 

DISCLAIMER: All the information published in Rural 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 Rural 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

Bonding agreements

Your Own Business
0

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.

Business briefs

News
0

Unfair contract terms regime extended to small business contracts

The Fair Trading Amendment Act 2021, which was passed into law in August, bans unconscionable conduct in trade and prohibits businesses from having unfair contract terms in their small business contracts.

The Act amends the Fair Trading Act 1986 in two key ways.

  1. Unconscionable conduct: The legislation prohibits unconscionable conduct in trade. It does not define what ‘unconscionable conduct’ is, but it does provide a list of factors for the court to consider when assessing unconscionable conduct, including:
  • The relative bargaining power between the person engaging in the conduct and the person affected by the conduct
  • The extent to which the trader and an affected person acted in good faith, and
  • Whether unfair pressure or undue influence was used.
  1. Unfair contract terms: The Act extends the existing protections against unfair contract terms in standard form consumer contracts to include small business contracts.

The legislation defines this as a contract for the provision of goods or services between businesses where the value of the relationship between the businesses is less than $250,000 (including GST).

These two changes will come into force on 16 August 2022. This gives businesses just under one year to review their small business contracts to ensure they comply with the new requirements. The Commerce Commission is expected to release guidance on what unfair terms might look like for small business contracts.

Be aware, however, that some minor changes in the legislation are already in force.

If you would like some guidance on how this legislation affects your business, please feel free to contact us.

Many welcome new sick leave provisions

One employee’s sick leave may have doubled, but another employee’s sick leave may still only be five days. How does this work?

On 24 July 2021, minimum employee sick leave entitlements increased from five days to 10 days per year[1]. Key points for employers are below.

When does the entitlement start? Not all employees will get the increase in sick days at the same time. Employees will get an extra five days’ sick leave when they reach their next entitlement date. This is either after they reach six months’ employment or on their existing anniversary.

For example, if your employee’s anniversary date was 10 June, they become entitled to 10 days’ sick leave on 10 June 2022, but until then, their entitlement remains at five days.

What remains the same?

  • Employees who already get 10 or more sick days a year will not be affected by this change
  • The maximum amount of unused sick leave that an employee can be entitled to accrue remains at 20 days, and
  • The change applies to all employees whether they are full-time or part-time.

Remember, it’s your obligation as an employer to ensure you’re aware of your employees’ entitlements.

Changes to the retention money regime for construction contracts

The new Construction Contracts (Retention Money) Amendment Bill proposes to change the way contractors hold retention money under construction contracts.

The current regime allows contractors to mingle retention money with working capital, which can result in subcontractors missing out on money owed to them if the contractor goes into liquidation. This happened in the liquidation of Mainzeal Property and Construction Limited in 2013.

The proposed legislation aims to put clear rules in place around how retention money is to be held to provide protection for subcontractors.

Key changes: The Bill proposes that contractors must:

  • Place retention money on trust as soon as possible and keep it separate from other money or assets, and
  • Hold retention money in a trust account in a registered bank in New Zealand or in the form of complying instruments (such as an insurance policy or a guarantee).

The Select Committee is expected to report on the Bill in November 2021. Contractors will need to be prepared for the changes when the Bill passes, as failure to comply could result in significant fines.

[1] Holidays (Increasing Sick Leave) Amendment Act.

Postscript

Latest news, News
0

Mature workers toolkit

The government’s business website has launched a ‘Mature workers toolkit’ to help employers to get workers aged 50 years-plus into small to medium-sized businesses.

The toolkit has a range of guidance, support tools and resources that employers can use to help attract, recruit and retrain mature workers. It includes:

  • A worksheet to help write compelling job advertisements
  • A build-your-own-policy for on-the-job learning
  • Tips on leading and working with mature workers, and
  • Case studies.

With more people working later in their lives, it’s important that the skills and knowledge of mature people are retained in our workforce. Seek NZ’s May Employment Report shows the demand for staff continues to increase. “Job ads increased by 5% month-on-month and are almost triple the volume that they were this time last year,” reports Seek NZ.

Fifteen per cent of our population is aged over 65; this is expected to increase to 20% over the next 20 years. It is important that the value this group of people gives to business is acknowledged not only by employers, but also by their staff.

To find out more, go here and search for Mature workers toolkit.

Bright-line test extended to 10 years

In March the bright-line test was extended to 10 years.

The bright-line test was established in 2015 to tax the profit made on selling residential property where sold within two years of purchase. The bright-line period was extended to five years for properties purchased from 29 March 2018.

Now, if you have a binding agreement to purchase on or after 27 March 2021 and you sell the property within 10 years, any profit will be subject to income tax.

For residential properties that are ‘new builds’ the five-year period still applies. Rules are currently being developed about which new builds qualify for the shorter bright-line period.

Do note however, in most (but not all) circumstances your family home is exempt from the bright-line test. The March 2021 announcement also saw changes as to how the family home exemption is calculated for properties subject to the bright-line test.

To know more about the bright-line test and how it may affect you, please feel free to contact us.

To jab or not to jab?

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Your employee doesn’t want a Covid vaccination?

While many Kiwis are queuing up and eagerly awaiting their Covid vaccinations, not everyone is willing to take ‘the jab’. Recent headlines of sacked border staff who refused their Covid vaccinations have highlighted the difficulty many employers will face in deciding if their staff can reasonably be required to be vaccinated.

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