white brick wall with black and white graffiti

The end of the 90-day trial for AEWV is coming

By Lavinia Askin

17 October 2023

Immigration New Zealand (INZ) is now placing Accredited Employers under extra scrutiny, as explained in an earlier article.

Radio NZ reports that as of 4 October 2023, 22 employers have had their accreditation suspended and a further 61 have had it revoked. Over 50 employers’ accreditations were still being assessed for potential immigration or employment breaches at that time.

There have also been negative implications for offshore Accredited Employer Work Visa (AEWV) holders. More than 500 individuals have had border alerts placed on them as a result of investigations. They cannot leave their home country for a job in New Zealand they feel they have already ‘paid for’ through the process of obtaining a visa and have no certainty about their future employment in New Zealand.  

This compounding situation has triggered the need for further measures to increase protection and support for migrant workers. Most recently, the government has announced it will prohibit use of 90-day trial periods for migrant workers on AEWVs.

This change will come into effect on 29 October 2023.

What will the end of the 90-day trial mean for Accredited Employers?

The intentions of the rule change are good – to encourage employers to only recruit migrants when they have a genuine labour need or skills gap, and to improve the fair treatment of migrant workers.

Not being able to use 90-day trial periods is likely to discourage small to medium size businesses from hiring migrants on AEWVs, as there may be additional risk perceived with the recruitment of migrant workers. However, it is important to note that problematic employees may be dismissed from their roles via other processes which are compliant with employment law. In this regard, employers are encouraged to seek expert advice.

The removal of the 90-day trial period creates yet another disparity between how AEWV holders are treated and how New Zealand citizens or residents and other types of temporary visa holders are treated.

There is no getting around the rule change:

  • A Job Check application will be declined, if the employment agreement includes a 90-day trial period clause.
  • Adding in a 90-day trial following approval of the Job Check may lead to an employer losing their accreditation.

The policy change does not apply to currently approved Job Checks, or to migrants who already hold, or who have applied for an AEWV.

We are also expecting updates from INZ before the end of the year clarifying that:

  • INZ can suspend accreditation when there are indications that an employer may be in breach of specific immigration and employment standards. There does not need to be a formal investigation.
  • The requirement for accredited employers to not pass on recruitment and employment costs to migrant workers covers both visa applicants and visa holders.

Pitt & Moore provide expert advice on immigration, employment and visa rules and processes so please contact us for some expert guidance.

Change is on the way for ‘triangular employers’

Triangular employment arrangements (such as labour-for-hire) with employers who employ migrants to work at other businesses’ premises have also been identified as requiring tighter controls.

All triangular employers will need to provide evidence of financial viability upfront when applying for or renewing accreditation.

Later this year, triangular employers of construction workers will be required to increase their proportion of New Zealand workers from 15% to 35%. This new requirement for the New Zealand workforce threshold must be met at both the Job Check and accreditation stages.

A date for when these changes will come into effect has not yet been announced, but we are expecting an update soon.

Are your governance and compliance risk standards up to scratch?

INZ has announced a raft of changes to both make the AEWV more appealing to skilled migrants (which we previously summarised in an article here) and to better protect them from potentially unscrupulous employers.

With the additional scrutiny INZ is placing on employers, directors and senior managers, now is the time to consider implementing better standards of governance and compliance risk oversight at the workplace, as well as systems for management of operational risks related to immigration and employment.

Pitt & Moore has expertise in both immigration and employment law and is well placed to assist your business. 

Have questions or concerns? Pitt & Moore is here to assist

If you have any questions or would like assistance with your company’s accreditation or Job Check applications, please get in touch with Pitt & Moore’s specialist employment and immigration team: 03 548 8349.

Domestic Violence Leave – Key Points for Employers

By Heather Collins

6 June 2023

On 1 April 2019 the Domestic Violence – Victims’ Protection Act came into force adding legal protections into the Employment Relations Act for employees affected by domestic violence.

The Act allows employees affected by domestic violence to request paid Domestic Violence Leave and short-term flexible working arrangements. In addition Employees can now raise a personal grievance on the grounds that they have been adversely treated by their Employer because of their Employer’s belief that they are affected by domestic violence. Adverse treatment in the workplace of people affected by domestic violence is also a new form of discrimination under the Human Rights Act 1993.

So what does this mean for Employers? The key things to note about this recent law change are set out below.

What is Domestic Violence?

Domestic Violence means violence against a person by any other person with whom that person is, or has been, in a domestic relationship. It includes:

  1. physical abuse;
  2. sexual abuse;
  3. psychological abuse, including, but not limited to:
    • intimidation;

    • harassment;

    • damage to property;

    • threats of physical abuse, sexual abuse, or psychological abuse;

    • financial or economic abuse (for example, denying or limiting access to financial resources, or preventing or restricting employment opportunities or access to education):

A single act may amount to abuse and a number of acts that form part of a pattern of behaviour may amount to abuse, even though some or all of those acts, when viewed in isolation, may appear to be minor or trivial.

What is a domestic relationship?

A person is in a domestic relationship with another person if the person—

  1. is a spouse or partner of the other person; or
  2. is a family member of the other person; or
  3. ordinarily shares a household with the other person (excluding people who share a dwelling and are in a landlord-tenant relationship, employer-employee relationship or employee-employee relationship); or
  4. has a close personal relationship with the other person (excluding employer-employee and employee-employee relationships).

Who is a person affected by Domestic Violence?

A person affected by domestic violence means a person who is 1 or both of the following:

  1. a person against whom any other person inflicts, or has inflicted, domestic violence;
  2. a person with whom there ordinarily or periodically resides a child against whom any other person inflicts, or has inflicted, domestic violence.

Who is eligible for Domestic Violence Leave and short term flexible working arrangements?

Employees become eligible for Domestic Violence Leave if they have worked for their Employer for at least six months and for at least an average of 10 hours a week (and must have worked either at least 1 hour each week or at least 40 hours each month over the six month period).

If an Employee isn’t eligible for Domestic Violence Leave it would be prudent for the Employer to consider what other support could be provided to ensure that the Employee is safe in the workplace (discussed in more detail below).

What entitlements does an eligible Employee have?

Eligible Employees are entitled to at least 10 days paid Domestic Violence leave each year and can ask for up to 2 months of flexible working arrangements.

Does a Domestic Violence Leave clause need to be added to Employment Agreements?

It isn’t mandatory for a Domestic Violence Leave provision to be included in an employment agreement. However it can be a helpful way of letting Employees know about their entitlement, and to have consistency within the employment agreement if other leave entitlements such as sick leave and bereavement leave are already set out.

What potential privacy issues need to be considered?

It will be important for Employers to keep in mind the sensitivity of domestic violence and the need for privacy when dealing with a request for Domestic Violence Leave. In particular Employers should consider carefully how they approach a request, what information is provided to other staff, and how leave and flexible working arrangements are managed. A Domestic Violence Leave policy may be helpful here.

What health and safety issues need to be considered?

Health and safety obligations should be considered when a request for Domestic Violence Leave is made, given that the staff member’s safety in the workplace may be impacted if they are suffering from trauma or other effects of domestic violence. Employers should turn their mind to what support can be provided to the affected Employee to ensure that they are kept safe at work. In addition to Domestic Violence Leave and flexible working arrangements such support could include, for example, sick leave, unpaid leave, and employee assistance services.

What proof can be requested from the employee?

In many cases an Employer will be comfortable that domestic violence has occurred based on the Employee telling them so. However the Act does allow the Employer to ask for proof of the domestic violence when a request for Domestic Violence Leave is made. The Employer will need to take care when deciding whether requesting proof is reasonable in the circumstances.

Where a request for proof is made by the Employer both the Employer and the Employee need to act in good faith. There is no guidance on what proof can be asked for. However proof could include things like a letter from a support worker, reports from medical professionals or Police, and orders made by the Court. Once again the Employer will need to ensure any proof received is treated as confidential and that the Employee’s privacy is not breached in any way.

How should a request for Domestic Violence Leave be responded to?

An Employer must respond to the request for Domestic Violence Leave as soon as possible but not later than 10 working days after receiving it, and must notify the Employee in writing of whether his or her request has been approved or refused

In or before giving the notification the Employer must provide the Employee with information about appropriate specialist domestic violence support services.

If the Employer refuses an Employee’s request, the notification given must:

  • state that the request is refused because proof required to be produced was not produced within 10 working days after the Employer receives the request and/or that the request cannot be accommodated reasonably on 1 or more of the non-accommodation grounds specified in section 69ABF(2) of the Act;

  • state the ground or grounds for the refusal; and

  • explain the reasons for that ground or those grounds.

What can employers do to prepare for a Domestic Violence Leave request?

Now is a good time for Employers to consider whether they have the right procedures in place to ensure that Employees affected by domestic violence are not treated adversely in the workplace.

It is worthwhile reviewing current employment agreements and policies with the new entitlement for Domestic Violence Leave in mind. As noted above a domestic violence policy which explains how requests for Domestic Violence Leave are handled and how the Employer will provide support can help, as well as updating flexible work policies.

How Pitt & Moore can help

At Pitt & Moore Lawyers our employment team can prepare and review Employment Agreements and Employment Policies, as well as review your current employment practices as part of an employment health check-up for your business.

Talk to us

If you would like advice on this topic or any other employment related issue please contact our Employment Team today.

Asking Employees to Work Extra Hours – a Common Fishhook for Employers

By Heather Collins

6 June 2023

It’s not uncommon for employers to need their staff to work extra hours from time to time. However care should be taken so that directions to work additional hours are compliant with the Employment Relations Act (the “Act”), and recorded correctly in the employment agreement. In short employers need to make sure that a correct “availability provision” is included in the employment agreement if the Act requires it in the circumstances.

You will recall that “zero hours contracts” were made illegal some time ago. These were agreements which required employees to be available for all work offered, without compensation for being available, and without any guaranteed hours of work. As an alternative to zero hours contracts availability provisions were introduced to allow some flexibility to request employees work additional hours, while also providing employees with increased protection.

Deciding on when an availability provision needs to be included in an employment agreement still manages to trip up employers. It’s important to understand when an availability provision is required, and if so what the clause should contain.

The key things to note are:

  • An availability provision needs to be included in an employment agreement if an employer can offer work at their discretion and the employee is required to perform that work if requested.

  • The employer must have genuine reasons based on reasonable grounds for including the availability provision.

  • An availability provision must set out:

a) what specific hours the employee is required to be available for work (in addition to the specified guaranteed hours of work); and

b) reasonable compensation for the hours that the employee must be available to accept work. Where the employee is on a salary it can be agreed in the employment agreement that the salary includes compensation (provided that this is reasonable in the circumstances).

  • When considering reasonable compensation the employer should take into account the number of hours the employee needs to be available, the proportion of those hours in relation to the employees guaranteed hours of work, any restrictions on the employee during the hours they need to be available and the employees pay under the employment agreement.

  • A deficient availability provision will not be enforceable, meaning that the employee will not be required to perform the additional hours of work.

  • If an employment agreement allows the employee to turn down an offer of work in addition to their guaranteed hours of work, an availability provision is not required.

How Pitt & Moore can help

At Pitt & Moore Lawyers our employment team can prepare and review Employment Agreements and Employment Policies, as well as review your current employment practices as part of an employment health check-up for your business.

What sets us apart is that each of our Employment Lawyers are also immigration experts. This means that we can advise on all employment issues affecting your business, including issues connected to hiring migrant workers.

Talk to us

If you would like advice on this topic or any other employment related issue please contact our Employment Team today.

The Importance of Workplace Policies

By Heather Collins

6 June 2023

Polices play a vital role in ensuring that Employers and Employees meet their obligations to each other. Policies also provide useful guidance on what is and is not acceptable in the workplace, and how breaches are dealt with.

It is worthwhile taking the time to consider whether the current policies in place for your business are adequate, and whether any additional policies are required.

We have outlined below some of the key employment policies which can be useful tools when running a business.

Health and Safety Policy

Health and Safety obligations of Employers have become increasingly onerous over the years. Having a well drafted Health and Safety policy tailored to your business can be an important part of meeting health and safety obligations.

A Health and Safety Policy often dovetails with other policies such as Drug and Alcohol Policies or Safe Driving Policies (discussed below).

Drug and Alcohol Policy

If Drug and Alcohol testing takes place at your business we recommend having a detailed Drug and Alcohol policy in place.

Ideally a Drug and Alcohol Policy should set out:

  • when an Employee is required to take a test (such as where there is reasonable cause, post-incident, and random testing)

  • what positions or areas at the worksite are safety sensitive (for the purposes of random drug testing)

  • how tests are performed

  • what is being tested for

  • what happens if an Employee refuses to take a test or tries to cheat on a test

  • What happens if an Employee receives a failed result (tests positive for drugs or alcohol).

Safe Driving Policy

If your Employees drive work vehicles as part of their employment then a Safe Driving Policy can ensure that they understand what their obligations are when using the vehicles and what to do if they are involved in an accident.

Harassment and Bullying Policy

Preventing harassment and bullying in the workplace, and dealing with this issue correctly if it arises, is an important obligation for all Employers. A Harassment and bullying policy can set out clearly to staff:

  • what constitutes harassment and bullying

  • what Employees are to do if they are subject to harassment or bullying at work

  • the procedure the Employer will follow if a complaint about bullying or harassment is raised.

Electronic Devices/Social Media Policies

It can be useful to have a policy setting out how Employees are to use internet, voicemail and email while at work (both for business purposes or personal use). If an employer is monitoring business emails and internet use then it’s important the Employees know about this.

If a cell phone, laptop or other electronic device is provided to the Employee then an Electronic Device Policy can set out useful information about how that device is used and when it can be used, as well as how business confidentiality is to be maintained.

A Social Media Policy can clearly set out what an Employee can post on social media about their employment and other employees. It can also prohibit posting information sensitive to the Employer.

Privacy Policy

We suggest that at a minimum a Privacy Policy sets out what information is being collected, why and how the personal information is gathered, who will hold the information, how long it will be kept for, how it will be stored, and how an Employee can access and correct that information.

If an Employer is looking to use surveillance cameras in the workplace or work vehicles (either for general security or to monitor staff) then staff should be told about this in advance unless there are good reasons not to. As mentioned above Employees also need to be told how the information will be stored, that they can view it, how to make a request to view it etc.

How Pitt & Moore can help

If you would like us to review your current policies or draft new policies for your business we are happy to assist. We can also advise on how to introduce changes to policies and new policies to staff in a procedurally correct way.

Talk to us

If you would like advice on this topic or any other employment related issue please contact our Employment Team today.

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New Employment Legislation on the horizon

By Hannah-Jean McCarty

6 March 2023

There are numerous legislative changes on the horizon and employers are in for a busy year adjusting to new employment law developments.

Minimum Wage Increase

The minimum wage increase to $22.70 will come into effect from 1 April 2023. The increase is in line with recent increases in inflation and the current cost of living crisis. The starting out and training minimum wage will increase to $18.16. The effect on employees is significant, with the MBIE stating around 222,900 people are paid between $21.20 and $22.70.

There are concerns as to the effect on small businesses, with the 7% wage increase on previous increases which may introduce greater wage costs to the business.

Despite no legal requirement to provide a pay rise to those on $22.70, this minimum wage increase may give rise to pay inconsistencies for more experienced employees. If not already in the pipeline, it is a good time to create a strategy for managing pay relativity.

Holiday Act Changes

Although unclear when, changes to the Holiday Act are coming, The changes will introduce more transparency and clarity in determining aspects such as leave.

Annual Leave Payments (ALP) have previously been calculated at ordinary weekly pay or the average weekly earnings over the previous twelve months. A new calculation has been added that the ALP can also be paid at the weekly earnings over the last 13 weeks. Likely to have the most effect on commission based employment, as their earnings fluctuate and thus are more likely to be affected by this new calculation.

Timeframes on leave entitlement are soon to be changed. Employees will be entitled to sick leave on their first day of employment instead of waiting 6 months. Similarly, leave entitlement will change to pro rate basis, meaning an employee will be entitled to 2 weeks leave after 6 months of employment.

Parental leave will no longer affect ALP when an employee returns to work. Previously, an employee who returned from parental leave received a reduced ALP for 12 months following their return to work. However, under the changes the returning employee will receive their full rate for annual leave.

The Employment Relations (Extended Time for Sexual Harassment) Amendment Bill

The proposed bill will extend the time a person has to raise a personal grievance (PG) involving sexual harassment from 90 days to 12 months, to acknowledge that victims of sexual harassment may require more than 90 days to feel comfortable making a complaint. The 90-day rule does not reflect the way sexual harassment occurs in practice, this extension will allow complex and difficult sexual harassment matters to be dealt with more effectively. Employers need to be aware of situations where a PG involves allegations of sexual harassment alongside other allegations. Furthermore, some have expressed disappointment that the bill does not include workplace bullying or discrimination.

If you require any further information or clarification about upcoming legislation and how they may affect your business contact Pitt & Moore’s employment team on 03 548 8349.

Expect unions to soon impact your business

While union membership has been declining for a few decades, the balance of power is shifting back to unions. If you are an employer, you should be interested in the proposed “Fair Pay Agreement” system which will likely soon pass into legislation.

The intent of the legislation is described by the Labour Government as a way to lift wages of those on low to medium incomes, to “level the playing field” and to make a fairer system for workers. The National Party describes it as imposing mandatory union deals on workplaces. Regardless of your position on the political spectrum, this legislation will have significant impacts across the entire New Zealand workforce.

Who will be covered?

Any occupation can be covered by a fair pay agreement – cleaners, bus drivers, accountants, personal trainers, lawyers – the list goes on. Similarly, entire industries can be covered – such as all butchers and bakers in the supermarket/grocery industry, or all pickers and packers in the horticulture industry.

Effectively, once a union (or unions) has 1000 members (or 10%) support from a particular industry/occupation, or passes a public interest test – it can commence bargaining on behalf of all workers in that sector. Employers will be represented by representatives in negotiations. No detail has yet been released about how employer representatives will be selected.

What will the terms of the agreement be?

This will be up to the union representatives and the employer representatives.

It will be mandatory to reach agreement on normal hours of work, the coverage of the agreement, base wage rates, overtime and penalty rates. Other matters are mandatory to discuss, but not agree – such as health and safety requirements, training and development arrangements, flexible working, leave entitlements or redundancy.

How will the agreement be made and what impact will it have?

The agreement will be negotiated between the parties, who will receive funding and support from the Government to assist them in the process. If the parties cannot reach agreement – the Employment Relations Authority will step in and can refer the parties to mediation or facilitated bargaining. If that is unsuccessful, a party can apply for the Authority to “fix” the agreement.  

Once the negotiating union/employer representatives have agreed, it must be approved by a simple majority of both employee and employer voters. The negotiated agreement will then be the minimum standard for all employees in that industry/occupation.  

When are these changes coming in?

At the time of writing, the Fair Pay Agreements Bill is going through Select Committee. Submissions are open until Thursday 19 May 2022. The system is expected to commence shortly after the Bill has passed, at the end of 2022. The Government has indicated that it will ultimately be expanded to include contractors, but full detail about this has not yet been released. In the meantime, there will be penalties of up to $20,000 for an employer who tries to hire an employee as a contractor to avoid having to meet the requirements of a fair pay agreement.

Costs in the Employment Relations Authority

A further strengthening of unions has quietly occurred within the Employment Relations Authority. Usually when parties are in dispute, the successful party can get a costs award from the unsuccessful party, to help pay some of the legal costs the successful party incurred. This is a general presumption that applies in all levels of our court system, although each court and tribunal keeps a discretion over whether an order is made.

However, a new Practice Note advises that parties can expect no costs award to be made in an employer/union dispute before the Authority.  This is a significant change as unions can now initiate claims without fear of having to meet a costs award if unsuccessful.

Employers will need to choose the better of two options – settlement or unrecoverable legal fees with a public Authority determination. Which would you choose?

If you would like more information about the proposed Fair Pay Agreements Bill or assistance with a union dispute, contact Heather Collins or Sarah Thompson at Pitt & Moore – (03) 548 8349 or heather.collins@pittandmoore.co.nz and sarah.thompson@pittandmoore.co.nz.

person holding paper near pen and calculator

Financial Relief for Businesses Amidst COVID-19

By Heather Collins

28 August 2021

As the nationwide lockdown continues and a lot is still unknown, this is proving to be a difficult time for many businesses throughout New Zealand. However, the Government is rallying to help businesses to say afloat.

Below is a list of relief programs and initiatives that businesses may be able to utilise to weather the storm:

  1. COVID-19 Wage Subsidy August 2021 – Work and Income
  2. COVID-19 Resurgence Support Payment (RSP) (ird.govt.nz)
  3. COVID-19 Small Business Cashflow Scheme (SBCS)

Also available are the:

Covid-19 Leave Support Scheme (LSS) – which is designed to help businesses pay workers who have been told to self-isolate and can’t work from home; and

COVID-19 Short-Term Absence Payment (STAP) – for workers who have to stay at home while waiting for a Covid-19 test result and can’t work from home.

The devil, as always, is in the detail. In particular with the Wage Subsidy, businesses need to make a statutory declaration, agreeing to a range of obligations, which can be fairly onerous. It is critical that employers are able to meet these obligations, otherwise it would not be advisable to sign the declaration.

Talk to us

If you need advice on whether your business is eligible for any of the above mentioned programs get in touch with the team at Pitt & Moore and ask for Geoff Caradus or Heather Collins. We are here to help if you need our assistance!

New Accredited Employer Work Visa: What migrant workers need to know

By Elly Fleming

21 May 2021

This year sees many changes to the visa and immigration process if you are a Non-New Zealand resident or citizen wanting to live and work in New Zealand. 

There is a new type of work visa for migrant workers – the Accredited Employer Work Visa, and a new employer accreditation regime.

We outlined the new regime and implications for employers in our article earlier this week – Changes to Employer Accreditation – What New Zealand employers need to know.  

In this article, we address the implications for migrant workers who already hold employer assisted work visas or may be considering applying for one in the next 6-12 months.

Work visa categories affected by the change

A recap – the following six temporary work visa categories will be scrapped from 1 November 2021 and will be replaced with one type of visa – the Accredited Employer Work Visa:

  1. Essential Skills including the Essential Skills in Demand Lists
  2. Work to Residence – Long term Skill Shortage List occupation
  3. Approval-in-Principle (Essential Skills)
  4. Talent (Accredited Employer)
  5. Silver Fern (Practical Experience)
  6. Silver Fern (Job Search)

Immigration New Zealand (INZ) statistics show that from July 2020 to April 2021 there were 31,974 Essential Skills Work Visas granted. That is a very large number of people  who, at some stage, will need to move over to the new Accredited Employer Work Visa. It will be interesting to see how things go at INZ when they are hit with an influx of applications over the next 12 to 18 months!

New Accredited Employer Work Visa

We anticipate a relatively straight forward process for this work visa if your employer or prospective employer has completed their accreditation steps.

For example, under the new regime, the employer undertakes a labour market test before a migrant worker can then submit their application. This makes the process easier for you.

There are still some unknowns about the applicant process. For example, will there be an “age” limit to this visa, and what is its duration?

What does look likely is that you will still need to demonstrate that you meet health and character requirements, and you will also need to provide evidence of your work experience and qualifications to show that you are skilled.

The new Accredited Employer Work Visa might also have a pathway to residence, but we are yet to hear what this will look like.

Essential Skills Work Visa holders

Most migrant workers in New Zealand hold the Essential Skills Work Visas. If you hold this visa then you will bear the brunt of the changes, so if your visa is expiring within the next year, you will need to start considering your options.

This is because employers will be asking themselves whether there is benefit in obtaining accreditation from 1 November 2021 and retaining their migrant workforce, as there will be a cost to them. (Non-accredited employers will still be able to support work visa applications under the Essential Skills work visa category until 31 October 2021).

Skilled Migrant Category residence applications

It is worth considering your options if you have a live Skilled Migrant Category residence application in process. As it stands, if you are on an Essential Skills Work Visa and have a live residence application in process, then you are entitled to a further visa for six months, or one year, while your application is being assessed. Your employer is also exempt from conducting a labour market test.

But, from 1 November, those waiting for decisions on their residency applications may not be able to apply for an extension under the Essential Skills category – because this category won’t exist!

Clarification on this is being sought and should become clearer as time passes.

Talent (Accredited Employer) Work Visas

You can continue to remain on this visa, as long as your conditions do not change. You may already qualify for residence under the current Residence from Work visa category and it may be worth looking into this.

If you are working for an employer who is already accredited, and you do not hold a Talent (Accredited Employer) work visa, talk to us to see if you are eligible to apply under the current policy before you lose this opportunity.

Residence from Work Visa

If you have a Residence from Work visa application underway, and are requiring a further Work to Residence visa to be granted residence, you will be able to continue this process if you remain with your employer.

Open Work Visa holders – start planning ahead!

Arguably, if you are on an Open Work Visa, you are not affected. But that does not mean that these changes will not apply to you eventually – especially, if your pathways to residence become limited.

Those on an Open Work Visa who would be moving on to Essential Skills Work Visa should start thinking now about whether it is of benefit to apply for this visa sooner. For example, if your current Open Work Visa expires in less than a year, let’s have a chat about a possible route forward for you.

Skilled Migrant Category backlogs

This week, we were anticipating an announcement on the backlog of Skilled Migrant Category residence applications however, this did not end up happening. Watch this space.

Where to from here?

The new reforms may appear daunting and there are still a number of questions that remain unanswered.

The key message from INZ is that as long as your visa remains valid and you meet the conditions, you will not be affected. But, we are waiting for the “fine-print” that could change your immigration journey.

It is clear that pathways to residence and options for migrants will become very limited going forward. The window of opportunity is short, and for those whose work visas are expiring in the next 6-12 months now, more than ever, it is important to have the right advice to plan ahead.

Talk to us

Many of us in the immigration team come from migrant backgrounds. We understand your needs and, speak your language. The immigration process can be stressful and in our view, an initial discussion with us can go a long way.

If you require assistance or guidance with a visa application, please contact us.

Changes to Employer Accreditation: What New Zealand employers need to know

By Elly Fleming

20 May 2021

The new employer accreditation regime is looking to come into effect in late September, with it being compulsory from 1 November. There are also changes coming with the introduction of the new Accredited Employer Work Visa. This article outlines the key areas of change, and the benefits of the current and the new regime.

Meanwhile, employers can still apply for accreditation under the current scheme until 30 June.

The question is, is the current or new regime best for you?

With the end of June looming, we recommend urgent legal advice is sought, so you know what the right option is for your business.

Dates at-a-glance

  • 30 June 2021: the current Accredited Employer regime will cease, with no new or renewing applications accepted from 1 July 2021;
  • late September 2021: the new Accredited Employer regime will be introduced and employers can voluntarily apply for accreditation;
  • 31 October 2021: six existing temporary work visa categories will close (including Essential Skills and Talent (Accredited Employer) work visa categories). New visa applications under the current visa categories won’t be accepted from 1 November 2021. Existing Visas will remain valid;
  • 1 November 2021: The new Accredited Employer regime becomes compulsory for employers who wish to support migrant workers under the new Accredited Employer Work Visa.

As the design of the new regime is finalised, it’s possible some of these dates will be pushed out, but we still recommend employers are ready.

The current accredited employer regime

An employer who successfully secures accreditation status with Immigration New Zealand, can support multiple migrant workers applying for a Talent (Accredited Employer) Work Visa.

Under the current policy, the accredited employer must pay the migrant worker a base salary of at least $79,560 per annum (or $38.25 per hour for a 40-hour week).

For some migrant workers, in the current immigration environment, the Talent (Accredited Employer) Visa Category may be their only chance to secure a pathway to residence in New Zealand.

Becoming an accredited employer is an intricate process that requires employers to demonstrate they are in a sound financial position, have good human resource practices, good work practices, including compliance with minimum employment standards as well as immigration law and are committed to training and employing New Zealanders.

Benefits of accreditation for employers under existing regime:

  • don’t have to continually test the local labour market before offering jobs to migrant workers;
  • can retain skilled migrant workers by providing them with a secure pathway to residence;
  • can support work visa applications for multiple migrant workers during the accreditation period – no limit on the number of migrants/roles;
  • attracting talent – skilled migrant workers prefer employers who can give them a pathway to residence.

As mentioned above, the 30 June deadline to apply for accreditation under the current scheme is fast approaching, so urgent legal advice is recommended, before the opportunity expires.

What is going to change?

The new compulsory employer accreditation regime is quite a shake up for immigration.

It will be an employer-led regime. Migrant workers won’t be able to apply for the new Accredited Employer Work visa until their employers have passed through two mandatory “gates” with Immigration New Zealand. Then the migrant worker has to pass the third gate.

Employers will pay Immigration New Zealand’s fees for the Employer Check (Accreditation) and Job Check stages outlined below.

The three gates process:

Gate 1: The Employer Check (Accreditation). There will be three accreditation levels:

  • Standard – for employers wanting to hire 5 or fewer migrant workers on Accredited Employer Work Visas during the accreditation period;
  • High-Volume – for employers wanting to hire 6 or more migrant workers on Accredited Employer Work Visas during the accreditation period; and
  • Franchise/Labour Hire – for businesses supplying staff to third-party places of employment.

Gate 2: The Job Check – employers will need to provide evidence that the job meets new criteria, including paying the market rate, complying with employment and immigration laws and labour market test, if required;

Gate 3: The Migrant Check – migrant workers need to apply for the Accredited Employer Work Visa and demonstrate they meet the visa criteria, including health, character and skills/qualifications to perform the role on offer.

Where an employer is not able to pass the Employer Check (Accreditation) and Job Check stages, they won’t be able to hire migrant workers in most circumstances, unless the migrant worker already holds an open work visa.

Existing accredited employers will need to transition to the new regime. What this transition involves or how it will be managed is still being decided by Immigration New Zealand.

On November 1, the following six temporary work visa categories will be replaced with one visa – the Accredited Employer Work Visa.

  1. Essential Skills including the Essential Skills in Demand Lists
  2. Work to Residence – Long term Skill Shortage List occupation
  3. Approval-in-Principle (Essential Skills)
  4. Talent (Accredited Employer)
  5. Silver Fern (Practical Experience)
  6. Silver Fern (Job Search)

This means there will be fewer options for migrant workers trying to work or get residency in New Zealand.

Until 31 October, employers will still be able to support work visa applications under the Essential Skills, or Talent (Accredited Employer), or Long Term Skill Shortage List work visa categories.

Benefits of accreditation for employers under the new regime:

  • access to migrant workers – ability to support a certain number of work visa applications during the accreditation period, numbers will depend on the accreditation level the employer obtains;
  • limited ability to bypass the requirement to test the local labour market before offering a job to a migrant worker – will depend on a number of factors, including location of job and wages;
  • ability to provide a pathway to residence for highly paid migrants only (for migrants earning at least 200% of the median wage or higher).

Will your business be affected?

The new regime will place pressure on employers, particularly those who have never been accredited or are not used to dealing with the complexities of Immigration New Zealand.

Compliance obligations on employers will also increase, so it’s critical for businesses to plan ahead and talk to us.

If the new regime is the best option for you, and you already employ migrant workers or intend to hire them in the near future, now is the time to get prepared, so you are ready to submit your Employer Accreditation application by September 2021.

We anticipate thousands of applications will be made when the regime opens, resulting in  processing delays that could have a detrimental impact on your business. We highly recommend employers don’t leave applying for accreditation to the last minute.

We have also published a resource for migrant workers addressing what they can expect over the next year and what they should consider.

We will continue to provide updates about the changes as they are announced. We encourage employers to subscribe to our Publications page.

Talk to us

We understand the needs of employers. What sets us apart is that we are experts in both employment law and immigration, so we can advise on all immigration/visa-related issues as well as employment-related issues.

Contact our us for professional legal advice that will give you a peace of mind.

Lessons for employers from a visa applicant’s unfair termination

By Heather Collins

9 March 2021

As immigration and visa specialists, we recently provided independent expert witness advice to the Employment Relations Authority on the case of Dilshaad Gill v Restaurant Brands Limited (RBL), where complex communications issues led to a finding of unjustified dismissal.

Applicant Mr Gill was employed by respondent RBL on a permanent basis in Johnsonville, Wellington from 2017 to 2019 as an Assistant Restaurant General Manager. RBL currently operates and owns the master franchising rights for the Carl’s Jr., KFC, Pizza Hut, and Taco Bell brands in New Zealand.

Given his work visa would expire in March 2019, Mr Gill emailed RBL in November 2018 to request documents in support of an essential skills work visa application. Mr Gill was under the belief that RBL would continue to support him in respect of his visa application and his employment: communications led Mr Gill to believe that RBL were following a process to assist him. In February, however, Mr Gill learned that he was unsuccessful in the recruitment round undertaken for his role. He was advised by RBL that his job was offered to a New Zealand citizen and therefore RBL could not support his application for a new work visa. Mr Gill took this as notice of his (unjust) dismissal on 14 February 2019.

It is clear from the wider details of this case that both parties had conflicting views about what they were discussing in regard to Mr Gill’s employment. Mr Gill saw himself as a permanent employee; applying for his visa with RBL’s support, and re-applying for his role, were a formality (as emails from RBL suggested). RBL, however, understood his need for a new visa but did not regard that as imposing any responsibility on them in terms of supporting his new work visa application. They believed they were obligated to appoint a New Zealand citizen if they could, hence the recruitment process.

The Authority determined the case in favour of Mr Gill and ordered RBL pay a sum of $18,000 for hurt and humiliation.

The lessons from the findings of this case are clear:

  • A positive duty falls on the employer to be clear with their communications and to act in good faith (as per Section 4 of the Employment Act).
  • Employers must let their staff know as early as possible that they are not intending to support visa applications (and why).
  • In these circumstances, employing a replacement pre-emptively (and unfairly) dismisses a current employee from their role.
  • Even if an employer believes an employee will be unsuccessful in a visa application, they are obligated to discuss the situation with the employee.
  • Advertising for a position should only occur when it is certain the role will be vacated appropriately.
  • It is not ethical to predetermine the outcome of a visa matter and guess the outcome. This only disadvantages employees.
  • Seek visa and employment advice early to avoid financial and emotional impact.

Get professional advice

The laws surrounding employment and immigration move quickly, and are designed to protect both employees and employers.

Get in touch with us at Pitt & Moore Lawyers for professional advice that will give you peace of mind.

How Pitt & Moore can help

What sets us apart is that we are experts not only in employment law, but also in each step of the immigration process. This means that we can advise on all immigration/visa-related issues as well as employment issues.

Talk to us

We can ensure that you receive comprehensive legal advice on all aspects applicable to your particular circumstances. Feel free to contact Elly Fleming or any other member of our Employment and Immigration team.

The new Privacy Act is in force – are you compliant?

By Geoff Caradus

3 March 2021

The new Privacy Act came into force on 1 December 2020, providing a modified (and in certain respects more onerous) regime governing the collection, storage and use of information about identifiable individuals (referred to in the Act as “personal information”). In particular, the new Act requires any entity or person who holds personal information (referred to in the Act as an “agency”):

  1. To take reasonable steps to ensure that any person from whom they collect personal information is aware of various matters, such as the fact that the information is being collected, why it is being collected and who will be the recipients.
  2. To only collect private information from individuals for a lawful purpose (and only to the extent it is necessary for that lawful purpose).
  3. To notify the Office of the Privacy Commissioner and the individual affected where a privacy breach poses a risk of serious harm to that individual (which is assessed taking into account various factors prescribed in the new Act).
  4. To appoint a privacy officer who will be responsible for:

    • ensuring that the agency complies with the Act (which of course means that the privacy officer themselves must be familiar with the requirements of the Act);

    • dealing with requests made under the Act, such as access to personal information, or correction of personal information; and

    • acting as the agency’s liaison with the Office of the Privacy Commissioner in relation to investigations and the like.

Most of these new requirements should be easy enough for businesses and other agencies to get right provided they know what is required of them.  In this respect the Office of the Privacy Commissioner provides a range of free and well put together training videos and courses at the website https://www.privacy.org.nz/tools/online-privacy-training-free/ We are available to assist also, if you would like.

A good example of common, obvious and also very easy to fix non-compliance would be the use of Covid-19 register or other visitor registers at the entry point to businesses without the inclusion of an appropriate privacy statement consistent with the requirements of the Act.

Fines for non-compliance with the Act can extend to $10,000 per incident and damages payable to the victim for serious breaches have been known to exceed $100,000. Putting the pure legal and financial ramifications to one side, it doesn’t seem like many months go by without the media running a significant story on a breach of privacy – usually doing untold reputational damage to the subject of the story. Given these potential repercussions of failing to comply with the new Act, if you haven’t already done so, now is the time to get yourself familiar with the requirements and ensure that you are compliant. 

Talk to us

For more information or professional advice on this topic please contact Geoff Caradus.

Compulsory Employer Accreditation Coming Your Way in 2021

In 2018-19 the Government consulted on key proposals which will significantly impact New Zealand businesses who employ or might employ migrant workers, as well as on migrant workers.  Those proposals have now been finalised, and are likely to be implemented later this year (following a COVID related delay). Those changes are summarised below.

Work visas applications will be via a new employer-led framework which will consist of three gateways:

Gate 1: The Employer Check (Accreditation)

Gate 2: The Job Check (Labour Market Test)

Gate 3: The Migrant Check

Under this framework, the onus of providing information at the initial stage shifts from the migrant worker to the New Zealand employer. Employers will need to follow a process of submitting an application to Immigration New Zealand with a range of prescribed supporting evidence about their business and paying an applicable fee.

The following six temporary work visa categories will be scrapped and replaced with one type of visa under the new framework:

  • Essential Skills including the Essential Skills in Demand Lists
  • Work to Residence – Long term Skill Shortage List occupation
  • Approval-in-Principle
  • Talent (Accredited Employer)
  • Silver Fern (Practical Experience)
  • Silver Fern (Job Search)

The new framework would require employers to hold ‘Employer Accreditation’ status with Immigration New Zealand before a visa could be approved for a migrant worker. This requirement is likely to include employers with existing employees on a work visa that require a visa extension.

The actual mechanics of Accreditation are not yet clear.  However it is reasonable to assume that to hold Accreditation employers will have to demonstrate they are compliant with immigration and employment law, are sustainable, and have appropriate policies and workplace practices.

There will have to be some sort of application process for employers to become accredited, and once the framework is introduced only accredited employers will be able to support migrants for work visas.  A significant hurdle is that at present the Government is proposing to have the new framework come into place on one day, without any kind of preparation or lead in process.  This means all 53,000 New Zealand employers who employ migrants are going to need accreditation for any future work visas from that time.  The administrative burden on Immigration New Zealand of the immediate introduction appears not to have been a consideration. 

To put themselves in a good position and at the front of the queue for accreditation it would be prudent for New Zealand businesses, who already employ migrant workers or intend to in the near future, to plan for this major change, review their processes and practices to ensure that they would be able to meet Immigration New Zealand’s requirements for accreditation.

In fact it would be prudent for all New Zealand businesses to make themselves ‘accreditation’ ready given they may need to employ migrants in the future even if that need is not there now. All New Zealand businesses should carefully consider whether they:

  • meet all immigration and employment law standards
  • have the requisite workplace policies and processes in place
  • understand the consequences of being placed on the MBIE’s stand down list 
  • want to offer a pathway to residence for prospective migrant workers.

Once the compulsory employer accreditation comes into effect we anticipate that there are likely to be processing waiting periods which could have a detrimental impact on your business. As a result, we recommend that employers don’t leave applying for accreditation to the last minute.

We will continue to monitor the developments in this area and will provide further updates as needed. We encourage employers to subscribe to our Publications page.

Talk to us

Contact our Immigration Team for professional legal advice that will give you peace of mind.

Skilled Migrant Category in the time of Covid-19

During Levels 4 and 3 of New Zealand’s lockdown earlier this year, New Zealand businesses were encouraged to work from home if possible. We saw many companies develop new strategies and improve their systems. At Pitt & Moore Lawyers, we established a virtual office that kept us together but apart, working online and via phone to successfully continue delivering the service and solutions that our clients have come to expect.

Unfortunately, the same successes can’t be claimed by Immigration New Zealand. Throughout Levels 4 and 3 during March to May this year, a significant number of INZ staff couldn’t work from home. While visa applications and expressions of interest continued to come through, there were significant difficulties in processing applications, especially when it came to hard copy applications. Work by Immigration New Zealand almost ground to a halt.

While Auckland is again in the midst of Alert Level 3, this time Immigration New Zealand’s operations don’t appear to be as badly crippled, but further delays have crept in which is not good news for visa applicants.

Unprecedented delays

The lockdown and virtual closure of Immigration New Zealand during March to May this year, exacerbated an already massive backlog of skilled migrant category (SMC) residence applications. In November 2019, there were over 10,000 migrants who had submitted their SMC residence applications and were waiting for news from Immigration New Zealand. With seriously hampered processing ability and more applications still coming in throughout the initial lockdown period, that number quickly ballooned. Today, the figure is around 13,000.

We understand that Immigration New Zealand are currently allocating SMC applications to Immigration Officers for assessment that were lodged during January 2019. As a result, it appears on average it is now taking nearly 18 months for an SMC residence application to be allocated for assessment and up to 2 years for a decision to be made. This is an all-time high delay for the SMC category in New Zealand!

Many migrants who have lost their jobs as a result of Covid-19 and who have already submitted their SMC applications, may lose their opportunity to gain residence due to the processing delays.

Sadly, we can’t see this situation improving any time soon until perhaps Immigration New Zealand dedicates additional staff resources to address the SMC backlog.

A hold on the selection of Expressions of Interest

One of Immigration New Zealand’s responses to Covid-19 was to indefinitely suspend selection of Expressions of Interest (EOIs) from the EOI pool. This decision means that no new SMC applications can be lodged at this time.

Immigration New Zealand’s decision to stop selection is problematic for a number of reasons, least of all that EOIs are normally valid for 6 month from the date of initial submission, or until there is a further draw. Immigration New Zealand has not advised that it will reimburse EOI lodgement fees, nor have they given any indication as to when the selection process will recommence.

Another ramification of suspending selection of EOIs is that the exception to the labour market test for migrants who have been invited by Immigration New Zealand to submit their SMC applications, when lodging a new Essential Skills Work Visa application is not currently available. This means skilled migrants’ employers, who otherwise might not have had to prove there are no New Zealanders who can do their job when applying for an Essential Skills Work Visa, would need satisfy that test.

Whilst it is appropriate that New Zealanders are employed ahead of migrants, the migrant protection was put in place in recognition of the need to retain skilled migrants to maximise the level of skilled employees in the national workforce and to provide individual employers with certainty and continuity around their specific workforce.

Long term ramifications for New Zealand

The recent overhaul of Essential Skills Work Visa, which we have addressed in a separate article (go to https://www.pittandmoore.co.nz/publications/overhaul-of-essential-skills-work-visa-category/) is going to create continual uncertainty for migrant workers.

Skilled migrants may be forced to leave New Zealand, particularly if they don’t see a timely pathway to residence. Where does that leave New Zealand?

Given the large number of SMC applications in the queue, I contend that this is a strong indication of the level of skill shortage in the country at the moment.

Sure, there may now be New Zealanders who have been laid off or have returned to New Zealand who could now fill some of those roles, but to think that we do not still need large numbers of skilled migrants in our workforce is short-sighted.

And what happens when the domestic economy picks up and employers start to recruit for positions that were lost? Who will fill the roles that will be created to ensure that upswing? And what about when foreign economies pick up and those Kiwis who returned prematurely to New Zealand head back overseas?

If we don’t retain skilled migrants, then that may impact recovery of our economy.

Skilled migrants are a major part of that economic recovery. If we lose skilled migrants – doctors and nurses, engineers and electricians, bakers, butchers and the like, those with recognised qualifications and years’ experience – then, when the economy picks back up, they may not be eager to come back if we have treated them poorly in the short-term.

Covid-19 and its impact on our country make for an awkward situation, one that bridges public health, the economy, our communities and the world at large. But it’s also prompted some important dialogue regarding how the knee-jerk reactions of Immigration New Zealand are going to affect us long-term.

Talk to us

If you have any questions about the Skilled Migrant Category or need immigration advice or assistance with your current circumstances, please contact Mike McMellon on 03 548 8349 or Mike.McMellon@pittandmoore.co.nz.

Staff Redundancies in the Context of COVID-19

We’ll look back at 2020 as a year defined by COVID-19. Despite the challenging nature of the economic landscape we have endured (and will continue to manage during this recovery phase), the reality is that employers’ obligations to their employees remain intact. This of course extends to redundancies.

The starting point – Considering whether redundancies are necessary

For many businesses, redundancies are an unfortunate outcome of a difficult situation, and it’s important to get it right so that everyone can follow the best course moving forward.

It’s not enough for an employer to feel that their business is suffering and that cashflow is down – a factual and financial analysis of their business has to show that this is indeed the case. Any conclusion that redundancies are necessary must be correct and genuine, and the employer must be able to demonstrate that the proposed change – such as restructuring or redundancy – is needed for the business’s survival, health and resilience.

This is especially important because, if an employer wants or needs to propose a restructure, then that proposal (and the basis for it) has to be put forward to the affected employee or employees – along with any relevant information and documentation.

If an employer is putting forward a case for restructure or redundancy, then the facts have to be correct and verifiable, otherwise the consultation process will be undermined by less-than-accurate information. Again, a restructure shouldn’t be based on what an employer feels, but rather on the evidence that supports the decision.

Can employees who refused to agree to a reduction in pay be first on the list for redundancy?

Making an employee first on the list for redundancy simply because they refused a reduction in pay can’t be considered a genuine motive. Remember that redundancies are about positions, not people; the motive for redundancy must be role- and business-related, otherwise the process will be undermined and could lead to personal grievance claims.

On the other hand, removing a staff member who is more expensive than another staff member in a similar role could be an acceptable motive. That said care needs to be taken. There is a risk that an employee could claim that they are being disadvantaged because they wanted to stick to their terms of their employment, or were not in a position to agree to a reduction in pay. As a general proposition, the criteria used to select which employee may be made redundant should be a matter of consultation and must be objectively fair.

Before you take any steps, get some legal advice

The current circumstances are stressful for employers and employment issues are, unfortunately, more complex and difficult to navigate at the moment.

We’re advising our clients not to rush in to redundancies without first receiving tailored advice specific to their business. Advice now will reduce the risk of personal grievances later when employers will be working hard to regain their losses and get their businesses back on track.

Talk to us

We are employment law specialists. If you need any advice or guidance in this difficult time, please contact Heather Collins.

Overhaul of Essential Skills Work Visa Category

From Monday, 27 July 2020 Immigration New Zealand (‘INZ’) will be using different rules to assess Essential Skills Work Visa applications. The new rules will only apply to new visa application lodged on or after 27 July 2020.

Existing visa application submitted to INZ prior to 27 July 2020 will be assessed on the basis of prior immigration instructions.

What has changed?

The existing Australian and New Zealand Standard Classification of Occupations (‘ANZSCO’) skill bands have been replaced with a simple wage threshold to determine:

    • visa conditions

    • maximum visa duration

    • Labour Market Test requirements

    • ability to support partner’s and dependent children’s visas

Make no mistake, INZ will still be considering ANZSCO to determine the market rate as well as the level of qualifications and/or experience required for the role on offer. This is to ensure that the applicant who is being supported is paid at the market rate and holds appropriate qualifications and experience required for a particular role.

Appendix 7 to the INZ Operational Manual includes a list of occupations that can be treated as an exception to certain skill level assessments for Skilled Migrant Category (‘SMC’) residence policy. From 27 July 2020 this list will not be used to assess Essential Skills Work Visa applications.

The ANZSCO will still be used in assessment of SMC applications. No changes have been made to the SMC rules at this stage.

Remuneration and median wage

Applicants who are paid below the median wage, currently $25.50 per hour, will need to meet more stringent requirements to be eligible for an Essential Skills Work Visa.

Overview of the new rules

If paid below $25.50 per hour

  • Employers will need to engage with the Ministry of Social Development and obtain a Skills Match Report

  • Employers will also need to advertise the role and consider New Zealanders

  • Maximum duration for each visa will be 6 months for the next 18 months (i.e. during the period of 10 July 2020 to 10 January 2022)

  • Maximum combined duration of all work visas in jobs paying below the median wage is 3 years at which time holders of this visa will be subject to a stand down period of 12 months.

  • Support visitor visas for partners (partners can apply for a work visa in their own right)

  • Support visitor or student visas for dependent children (subject to meeting the minimum income threshold)

If paid at or above $25.50 per hour

  • Employers will need to advertise the role and consider New Zealanders

  • Skills Match Report not required

  • Maximum duration of each visa is 3 years

  • No maximum combined duration – not subject to stand down

  • Support visitor or work visas for partners

  • Support visitor or student visas for dependent children (subject to meeting minimum income threshold)

Get professional advice

We highly recommend for temporary visa holders who currently hold or want to apply for a Essential Skills Work Visa, to get in touch with us early so we can expertly guide you through your and your family’s options for remaining in New Zealand.

How Pitt & Moore can help

We offer an initial free consultation to all new clients to discuss your particular circumstances and what services we can provide.

What sets us apart is that we are experts in each step of the immigration process. This means that we can advise on all immigration and visa related issues.

Talk to us

We don’t just advise on the visa requirements, we can ensure that you receive comprehensive legal advice on to all aspects applicable to your particular circumstances, including compliance and employment

Contact our Immigration Team for professional legal advice that will give you peace of mind.

Update to Insolvency Laws

The Government has recently passed temporary legislation to help companies facing cashflow difficulties due to COVID-19. There are new protections for directors from normal solvency related duties and businesses can place certain debts into ‘hibernation’ while continuing to trade. These supplement the more traditional options available to businesses facing solvency issues.

Directors Duties

Directors are usually subject to the following duties under the Companies Act 1993:

  • Reckless Trading: A director must not agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

  • Duty in relation to obligations: A director must not allow the business incurring an obligation unless the director believes on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

In the normal course of events, directors who are found to have breached those duties can face personal liability. To protect directors from such claims between 3 April 2020 and 30 September 2020 (this may be extended), directors may rely on “safe harbour” provisions where:

1. in the good faith opinion of the directors, the company is facing or is likely to face significant liquidity problems in the next six months as a result of the impact of COVID-19 on the company, its debtors or its creditors;

2. the company was able to pay its debts as they fell due on 31 December 2019 (or was first incorporated between 1 January 2020 and 25 March 2020); and

3. the directors consider in good faith that it is more likely than not that the company will be able to pay its debts as they fall due by 30 September 2021.

These provisions may assist directors to carry more risk than they may otherwise be comfortable with – thereby preventing them putting an otherwise viable company into liquidation. However, it is more important than ever that directors have accurate and current financial information, both for past performance and future projections. We note that there are no changes to director’s duties to act in good faith and to exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances.

Business Debt Hibernation

The temporary Business Debt Hibernation (BDH) regime creates another option to help businesses keep trading, despite cashflow pressures. The BDH scheme puts a one month freeze on the enforcement of debts during the proposal process. A further six months ‘hibernation’ will be available if the proposal is passed.

A process will need to be followed to put a BDH scheme in place; it is not automatic. The business will need to meet a certain threshold, put a proposal to their creditors and obtain agreement from 50% (by number and value) of those creditors within a month.

While an entity is in BDH, it will be able to continue to trade, subject to any restrictions agreed with creditors. Certain debts cannot be hibernated, including debts to the IRD and employment related debts and (for the six months) certain secured creditors. Otherwise, BDH will apply to all creditors regardless of whether they voted for the proposal or not.

To encourage businesses to continue to transact, new payments or dispositions of property are exempt from the voidable transactions regime (unless it is to a related party) while a business is in BDH. However, transactions will still need to be entered into in good faith by both parties, on arm’s length terms and without intent to deprive existing creditors of the company.

Many businesses will be eligible for BDH, including companies, trusts and partnerships. However, sole traders, licensed insurers, registered banks and non-bank deposit takers are exempt.

For Further Advice

Due to the complexity in the legislation, and their novelty, obtaining legal advice before relying on these announcements is crucial. This is not a situation where DIY is appropriate; failure to comply can have a significant impact (e.g. there are a number of areas where a director placing a business in BDH can inadvertently commit an offence by not following the specific steps required).

Additionally, while this legislation is new, solvency issues aren’t. There are other options available, which may provide a better long term solution for you and your creditors. Tailored advice will identify the best option for your situation.

How Pitt & Moore Lawyers can help

Pitt & Moore Lawyers can provide tailored advice and assist businesses worried about solvency issues.

Talk to us

For professional legal advice that will give you peace of mind contact either Geoff Caradus or Anissa Bain.

Is Your Business Facing Solvency Issues Due to COVID-19?

The Government has announced new legislation is coming to help companies facing cashflow or administrative difficulties due to COVID-19.

These include:

  • Giving directors of companies who face cashflow issues due to COVID-19 certain “safe harbour” protections from normal solvency-related duties;

  • Enabling businesses affected by COVID-19 to place existing debts into hibernation yet continue trading;

  • Allowing greater use of electronic signatures;

  • Permitting normal legislated deadlines for companies, incorporated societies, charitable trusts and other entities to be extended temporarily by the Registrar of Companies; and

  • Granting temporary relief for entities unable to comply with requirements in their constitutions and rules because of COVID-19.

We note that the Government still needs to receive Parliament’s agreement to these changes, and for the changes to apply retrospectively to the date of the Government’s announcement (being 3 April 2020).

Directors Duties

Directors are usually subject to the following duties under sections 135 and 136 of the Companies Act 1993 (the Act):

  • s 135 (Reckless Trading) A director must not agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

  • s 136 (Duty in relation to obligations) A director must not allow the business incurring an obligation unless the director believes on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

In the normal course of events, directors who are found to have breached those duties can face personal liability.

To protect directors from such claims over the next six months (to encourage them to continue to undertake their important role) the Government has announced its plans to introduce temporary “safe harbour” provisions to apply where:

  1. in the good faith opinion of the directors, the company is facing or is likely to face significant liquidity problems in the next six months as a result of the impact of COVID-19 on the company or its creditors;

  2. the company was able to pay its debts as they fell due on 31 December 2019; and

  3. the directors consider in good faith that it is more likely than not that the company will be able to pay its debts as they fall due within 18 months (for example, because trading conditions are likely to improve or they are likely to able to reach an accommodation with their creditors).

These provisions may assist directors to carry more risk than they may otherwise be comfortable with – thereby preventing them putting an otherwise viable company into liquidation. However, it is more important than ever that directors have accurate and current financial information, both for past performance and future projections. There are no changes to director’s duties to act in good faith and to exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances.

Business Debt Hibernation

Similarly, the proposed Business Debt Hibernation (BDH) regime intends to make it easier for businesses to keep trading during COVID-19, despite significant cashflow pressures resulting from the pandemic. It intends to:

  • encourage directors to talk to their creditors with a view to putting together a simple proposal for putting the business into hibernation;

  • allow for the directors to retain control of the company, rather than passing control to an insolvency practitioner;

  • provide certainty to new creditors that they won’t have to repay any money they receive, so as to encourage businesses to continue transacting with businesses in BDH; and

  • be simple and flexible so that it can be enacted quickly, and businesses can readily apply it to their circumstances without having to obtain legal advice.

A process will need to be followed to put a BDH scheme in place as it won’t be automatic. The business will need to meet a (to be determined) threshold, put a proposal to their creditors and obtain agreement from 50% (by number and value) of those creditors within a month. However, during the proposal process, there will be a one month freeze on the enforcement of debts. A further six months moratorium will be available if the proposal is passed.

While an entity is in BDH, it will be able to continue to trade, subject to any restrictions agreed with creditors. Once passed, it will be binding on all creditors (but not employees), not just those that voted for it.

To encourage businesses to continue to transact with a company in BDH, the Government plans to make new payments or dispositions of property exempt from the voidable transactions regime (unless it is to a related party). However, transactions will still need to be entered into in good faith by both parties, on arm’s length terms and without intent to deprive existing creditors of the company.

Most businesses will be eligible for BDH, including companies, trusts and partnerships. However, sole traders, licensed insurers, registered banks and non-bank deposit takers are exempt.

How Pitt & Moore Lawyers can help

Pitt & Moore Lawyers can provide tailored advice on how your business may rely on the announcements made by the Government.

Talk to us

For professional legal advice that will give you peace of mind contact either Geoff Caradus or Anissa Bain.

Epidemic Management Notice and Temporary Visa Holders

Further to our article announcing the NZ Government’s issuing of the Epidemic Management Notice, Immigration NZ have now clarified that:

  • Temporary visa holders (those holding for example work, student and visitor visas) who have a visa expiring before and on 1 April 2020 and are unable to leave New Zealand must apply online for a new visa before their current visa expires.

  • If temporary visa holders can’t provide certain information required by the online form, such as a new medical certificate, they can upload an explanation instead in order to complete the online application.

  • Normally, following a submission of an online application, visa applicants are grated an interim visa automatically when their current visa expires.

  • An interim visa allows people to remain lawfully in New Zealand for up to a maximum period of 6 months.

We have been advised that all of Immigration NZ’s overseas offices are closed for the foreseeable future as a result of COVID-19. A small number of staff are currently operating from Immigration NZ’s Head Office in Wellington, their priority is dealing with any COVID-19 requests. No other visa applications are being processed at this time.

We will update you as further information comes to light.

Talk to us

If you hold a temporary visa please contact us if you require immigration advice or assistance with your current circumstances.

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