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.

Epidemic Management Notice Issued

The New Zealand government has issued an epidemic management notice enabling the use of special powers to help control Covid-19. The parts of that notice which relate to immigration matters will come into force on Thursday, 2 April 2020. Immigration NZ have advised that the effect of the notice will be:

  • 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. Subsequently an interim visa will be issued.

  • Temporary visa holders who have a visa due to expire between 2 April and 9 July 2020 inclusive will have their visas automatically extended to 25 September 2020. Immigration NZ says that an email confirming visa extensions will be sent to these visa holders. A visa holder must be in New Zealand in order to have their visa extended. The extensions don’t apply to resident visas.

We recommend for temporary visa holders whose visas expire on or before 1 April 2020 to take particular care to ensure that they apply for a further visa before the expiry of their current visa.

The Epidemic Management Notice also gives additional powers to Immigration Compliance Officers and Judges when detaining people who are liable for deportation. The notice expires on 25 June 2020, but can be extended by the Government if required.

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.

COVID-19 Frequently Asked Questions What Employers Need to Know

Covid-19 is having an effect on all parts of all of our lives, not least in the way that we work. We are fielding a number of enquiries from our clients, and the frequently asked questions are set out below.

The important thing to bear in mind is to keep communication between all parties to an employment relationship open, frequent, and sensitive to each other’s circumstances. This is reinforced by the Employment Relations Act which requires employers and employees to be open and constructive with each other.

Please bear in mind that the below are general principles only, and specific circumstances may differ depending on employment agreements and other factors. For advice on your situation, please get in touch.

What happens with pay?

If an employee is “ready, willing and able” to work, then they must be paid their normal wage. If they are required by the government to self-isolate, then they are not ready willing and able to work and therefore not entitled to be paid.

If however an employer requires an employee to stay away from the workplace then the employee is entitled to be paid. The employee’s absence in this case is due to a decision of the employer, not the government or the employee themselves, and therefore are entitled to pay.

In the event of a Level 4 (or Level 3 in some circumstances) alert where people are required to stay home by the government and travel is severely limited, employees who cannot work from home will not be able to work, therefore not entitled to pay. If a business is required to shut by the government, the same will apply.

Many employers are likely to experience a significant downturn in their businesses. In this event a wage subsidy is available from the government. If there is no work for an employee, then technically employers should consult with respect to the prospect of redundancy. However, employers may look to agree with their employees reduced hours, periods of unpaid leave or other alternatives to redundancy. Specific advice should be sought on this point, as force majeure or frustration considerations may come into play.

Sick leave

Employees can use sick leave if they or a dependent family member is actually sick. Self-isolation is not in itself sickness, so sick leave is not strictly available to employees in this case. Employers are recognising the circumstances however and are being reasonably flexible.

Annual leave

If an employee wants to use annual leave then this should not be unreasonably refused. If an employer wants an employee to use their annual leave, and the employee does not agree to this, then the employer can require them to take annual leave with 14 days notice.

Returning to work

As a general principle employers will be able to request employees produce a negative test before returning to work – but only where the employer has reasonable grounds to suspect an infection.

Refusal to work

Employees are entitled to refuse to work under the Health and Safety at Work Act, if they have a reasonable fear that they may contract Covid 19. They do have to discuss this with their employers before doing so though.

Talk to us

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

New Zealand Border Restrictions – Who is allowed to come to New Zealand?

The New Zealand Government has taken further steps to stop the spread of the COVID-19. Our Prime Minister announced yesterday additional entry restrictions that will mean many foreign nationals will not be allowed entry to New Zealand. However, it is not a complete ban.

The Government will review the restrictions in 14 days.

What is the position right now?

The new restrictions come into effect for passengers boarding a plane to New Zealand from 11:59pm 19 March 2020 to 11:59pm 31 March 2020.

Currently, the following people will be allowed entry:

  • New Zealand citizens;

  • New Zealand resident and permanent resident visa holders (BUT entry permission will be refused to residence class visa holders where the visa was granted offshore and the person is arriving in NZ for the first time);

  • The partner, dependent children or legal guardian travelling with a New Zealand citizen, resident or permanent resident visa holder;

  • Australian citizens and permanent resident visa holders whose primary place of residence is New Zealand;

  • Aircraft crew and marine crew;

  • Members of Armed Forces travelling on a military craft.

The New Zealand Government is not restricting freight and goods which are still coming in. Sea freight routes remain open for imports and exports, including essential supplies.

An exception to the travel restrictions can be requested on a case-by-case basis for:

  • Humanitarian reasons

  • Essential health workers, as confirmed by the Ministry of Health

  • Other essential workers, as defined by the New Zealand Government

  • Citizens of Samoa and Tonga, for essential travel to New Zealand

  • Partners and dependents of temporary work or student visa holders who normally live in New Zealand where the temporary work or student visa holder is currently in New Zealand.

All travellers to New Zealand must now isolate themselves for 14 days upon arrival.

Get professional advice

If you are currently overseas and you hold a visitor/work/student visa and you were planning to travel to New Zealand, please contact us if you require immigration advice or assistance with your current predicament.

Likewise, if you have already submitted your visa application and it’s still under assessment or you were planning to apply for a visa, please get in touch and we can provide you with tailored advice concerning your particular circumstances.

We know that these restrictions will have a big impact on New Zealand employers as well as on migrants. At times like these, practical and reliable advice is essential as mistakes can be costly.

We also understand that Immigration New Zealand’s Manila office was closed on 18 March 2020 because the COVID-19 situation in the Philippines has changed. This office usually processes applications including Essential Skills, Specific Purpose and Partnership work visa applications. These applications will be reallocated to other Immigration New Zealand branches for processing.

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.

Employer Assisted Work Visas

All businesses who employ migrant workers will have read about upcoming changes in the immigration space. Communication from Immigration New Zealand hasn’t been entirely clear however, so this article will try to shed some light on what employers and migrant workers can expect over the next year.

Currently the skill level of a position is assessed by skill bands using the Australia New Zealand Standard Classification of Occupations (ANZSCO) along with remuneration. Immigration New Zealand have finally recognised that the ANZSCO is not fit for purpose, and so from mid 2020 that assessment will be removed for Essential Skills Work Visas. Instead there will be a simple income threshold based on median incomes at the time. Essentially if an employee is paid above the median income (currently $25.50 per hour) their employment will be assessed as skilled no matter what position they hold, and they will be eligible for a renewable three year visa.

Nelson has been designated as a “Higher Supply” region. That means that for applications for employees being paid above the median wage from early 2021 there will no longer be a labour market test – so there would be no need to advertise the position or work with Work & Income. This will be coupled with a requirement for employers have some sort of accreditation before they can sponsor a migrant worker (for detail on this please see our article on our Employer Accreditation). Please note that this is subject to the current Government being re-elected – election year has a way of throwing up surprises in the Immigration field.

Conversely however for employees paid below the median wage the labour market test will be much more stringent than the one presently in place. These employees will also only be granted 12 month visas, and can stay for a maximum of 36 months before they have to leave New Zealand for a minimum of 12 months (assuming they do not get a position which might mean they are eligible for a three year visa).

The ability to sponsor partners and dependent children has also been reinstated for this category of employee, but the rather perverse condition has been put in place that they can only receive visitor or student visas, and they will not be able to work. It was put to Immigration New Zealand that this approach will lead to migrants living in poverty – as only one person in the family can work, by Immigration New Zealand’s own definition they are relatively lowly paid, and the families will not have access to any government support including healthcare – but they appear to be determined to push ahead with it.

Regional Skill Shortage Lists will also be introduced – this is a welcome change provided it is done in consultation with local employers. It means that the different labour requirements of different regions will be recognised and catered for.

From early 2021 a new pathway to Residency will be opened for employees paid 200% of the median income, no matter what position they hold.

Finally, “Sector Agreements” are being negotiated in certain industries. These are designed to allow access to migrant workers for employers in a sector, with the trade-off being progress towards improvements in terms and conditions over time.

So, for some employers employing migrants will become significantly easier, while others may struggle in the new regime.

Talk to us

If you have any queries in respect of employer assisted work visas or the upcoming changes, or any other immigration related issues, please contact our Immigration Team.

Compulsory Employer Accreditation Coming Your Way

The Government has recently consulted on key proposals which will significantly impact New Zealand businesses who employ or might employ migrant workers, as well as on migrant workers.

The Government intends to scrap the following six temporary work visa categories and replace them with a 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.

This means that employers would need to follow a process of submitting an application to Immigration New Zealand (INZ) with a range of prescribed supporting evidence about their business and paying an applicable fee. Currently, the INZ fee for an initial Employer Accreditation application is $2,130.

From the documents released for consultation and information provided during community information sessions conducted by The Ministry of Business, Innovation and Employment (‘MBIE’), the message is clear – the government is very much set on introducing compulsory employer accreditation, what is open to negotiation are the mechanics of the accreditation process.

Impact on your business

The Government has indicated that in preparation for the move to the new framework, in August 2019, they would implement changes to:

  • the remuneration threshold for the Talent (Accredited Employer) Work Visa, increasing it from $55,000 per annum (or $26.50 per hour) based on a 40 hour working week to $78,000 per annum (or $37.50 per hour) based on a 40 hour working week. The Government has indicated that migrant workers who are already on the pathway to residence under the current Talent (Accredited Employers) visa policy would not be affected by this change and will still be able to qualify for residence if they meet the requirements of their existing visas.
  • the highly-paid threshold for Essential Skills Work Visa Category by increasing the hourly rate from $37.50 to $50.00, for employment with non-accredited employers, but dropping the labour market test requirement; and
  • the arrangements impacting mid-skilled workers under the Essential Skills Work Visa Category, whereby the remuneration threshold for mid-skilled workers will increase from $21.25 per hour to $25.00 per hour (bringing it in line with the Skilled Migrant Category remuneration threshold for ANZSCO levels 1-3 occupations). With the result that those migrant workers who hold Essential Skills Work Visas but are paid less than $25.00 per hour being re-classified as lower-skilled at their next visa application.

    The Government has indicated that this change is likely to have an impact on almost 10,000 migrant workers who are currently mid-skilled visa holders earning less than $25.00 per hour.

    The Government has also stated that the occupations most impacted by this change would be construction trade workers, food trades workers, hospitality and retail managers and automotive engineers

To be clear, however, at this time these changes have only been flagged by MBIE. They are not set in stone. The Minister of Immigration will announce final immigration policy changes in June 2019.

The Government has further indicated that between April and June 2020 they will introduce the new framework with compulsory employer 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.

How Pitt & Moore Lawyers can assist

We are experts in this field and can review your workforce composition, policies and processes as part of our business health check audit. We can explain to you how the new framework may impact your business.

We can also provide support with designing, implementing and monitoring your systems and processes to ensure compliance with your obligations as employers.

Likewise, we can assist with the preparation of applications for Employer Accreditation.

Don’t leave Employer Accreditation to the last minute

If in the next few months you are intending to employ more migrant workers, we recommend that you consider applying for Employer Accreditation ahead of time, particularly if you want to offer a pathway to residence to your migrant workers.

Once the compulsory employer accreditation comes into effect there are likely to be processing waiting periods which could have a detrimental impact on your business.

Talk to us

Contact Mike McMellon today to get advice on the best way forward for your business.

The Real Cost to Businesses of Breaching Minimum Employment Requirements

Three recent decisions of the Employment Relations Authority have emphasised the importance of employers complying with minimum employment requirements – and the significant penalties employers can face by failing to do so.

Silviculture Solutions Limited decision – failure to pay minimum wage

Silviculture Solutions Limited, a large forestry company which employs up to 250 staff has been ordered to pay $35,000 after failing to pay its workers minimum wage. As a result of this penalty the company has been placed on the Immigration Employer Stand-down List preventing it from employing migrant workers for 18 months. It is noteworthy that approximately half the company’s workforce normally comprises of migrant workers.

The Employment Relations Authority held that the company used an “illegal system of calculating pay” because it only paid employees for their “productive hours” – being the time that the company expected the work to take – not the actual hours worked by the employees. In addition the company failed to pay workers for their attendance at safety meetings, or time spent preparing equipment and travelling to various work sites in the forest.

Golden Spring Takeaway decision and Modern Floor and Wall Limited decision – various breaches

Napier based restaurant Golden Spring Takeaway has been ordered to pay $30,000 for breaching a number of minimum requirements including failing to keep wage, time, holiday and leave records and failing to keep copies of employment agreements for its staff. Likewise the Auckland based flooring company Modern Floor and Wall Limited and its director have been fined a total of $25,000 for failing to pay the minimum wage and holiday pay and failing to keep holiday and leave records.

What you can do to protect your business?

The Employment Relations Authority is sending a firm message that breaches of minimum employment standards will not be tolerated. It is vital that employers understand their minimum employment requirements and apply them correctly to avoid penalties and being placed on the Immigration Employer Stand-down List. Both actions can have a significant impact on the bottom line and reputation of a business.

If you are unsure whether you are complying fully with minimum employment requirements Pitt & Moore Lawyers can help by completing an employment compliance health check for your business.

Talk to us

If you have any queries in respect of minimum employment standards, or any other employment law issues, please contact our Employment Team.

Roundup of Changes in Employment Law

Numerous employment related Bills have made their way through Parliament, with significant changes on the horizon for employers set to come into force during 2019. The employment landscape is set to shift towards greater employee and union rights.

With this in mind, it is crucial for employers to start preparing for the impacts of the legislative changes on their businesses.

Employment Relations Amendment Bill 2018

Caught amongst the rush as we head into the 2018 holiday season is the passing of the Employment Relations Amendment Bill 2018 (“the Bill”). The Bill has certainly has its fair share of ups and downs since it was first introduced to Parliament in January 2018.  

The Bill received Royal assent on 11 December 2018, with some changes taking immediate effect. Other changes are set to be implemented on 6 May 2019.

Changes that take immediate effect from 11 December 2018:

  • Union representatives will be able to enter workplaces without consent if the employees are covered under or bargaining towards, a collective agreement.
  • No more pay deductions for partial strikes but, an employer can respond to a partial strike the same way as any other strikes, such as suspending employees without pay or a lockout.
  • Businesses will be obliged to enter into bargaining for multi-employer collective agreement (MECA) if asked to join by a union, unless there are reasonable grounds for them not wanting to do so.
  • Protections against discrimination of employees based on the union membership status will be extended to 18 months, of employees undertaking union activities. This was previously 12 months and is not retrospective.
  • A union will be able to initiate bargaining 20 days ahead of the employer.
  • If an employee requests reinstatement in the course of bringing a claim for unfair dismissal, the Employment Relations Authority (ERA) will need to consider reinstatement as the first course of action, if it is reasonable and practicable for both parties.
  • New categories of ‘vulnerable employees’ may apply to receive protections afforded via an application process set out in the Act. Vulnerable employees include those who work in caretaking and cleaning services.
  • Categories of “vulnerable employees”  may be added to, varied or removed in response to changing work conditions by the Minister.
  • The ability of the Employment Relations Authority to make a determination that bargaining is over has been removed. 

 Changes from 6 May 2019:

  • The right to set rest and meal breaks will be restored based on the number and duration of hours worked. An employer and employee will have to agree as to when the breaks should be taken, if there is no agreement (written or oral) then the breaks should be taken in the middle of the work period, as long as it is reasonable and practicable to do so.
  • No more 90-day trial periods for businesses with more than 20 employees. However, employer will be able to continue to use probationary periods to assess an employee’s skills against the role’s responsibilities.   Note: Probationary periods are different to the 90-day trial. Employers will need to carry out fair process during the probationary period in assessing the employee’s skills such as by telling them if there are issues with their work, how they can fix those issues and giving the employee the opportunity to improve.
  • Unless there are genuine reasons based on reasonable grounds not to, the duty to conclude bargaining will be restored for single-employer collective bargaining.
  • For the first 30 days, new employees must be employed under terms consistent with the collective agreement. The employer and employee may agree on more favourable terms than the collective after this period.
  • Pay rates and indication of how pay may increase over the term of collective agreement, will need to be included in collective agreements.
  • Within the first ten days of employment, employers will need to provide new employees with an approved ‘active choice form’ so that the employees can have the time to consider whether they should join the union.
  • Employees who are union delegates will have to agree or at least, notify their employer in advance, if they have to undertake their union activities. These union delegate employees will need to be paid for a reasonable amount of time to exercise their union activities, however, the employer can also deny the request on reasonable grounds.
  • Unions may provide to the employers information about the role and function of unions, to provide to prospective employees. The employer will need to pass on this information unless:
  1. The information is confidential; or
  2. The information:
    1. is about the employer; and
    2. may mislead or deceive the prospective employee ; and
    3. would significantly undermine bargaining between the employer and prospective employee.
  • If restructuring takes place, employees in specified ‘vulnerable industries’ (e.g. cleaning services, food catering service etc.) will be able to transfer to the new employer, on the terms and conditions of their old job, regardless of the size of their employer, by giving a notice period of at least 10 working days.

Domestic Violence – Victims’ Protection Act 2016 

Amendments to the  Domestic Violence – Victims’ Protection Act 2016are set to take effect on 1 April 2019.

The new law aims to enhance legal protections in the workplace for people affected by domestic violence.

From April 2019, employees affected by domestic violence will be entitled to paid ‘domestic violence leave’ of up to 10 days each year. Employees will also be able to request flexible working arrangements for a short-term (up to two months or less) to which the employer will need to respond urgently (within 10 working days)

The law also explicitly prohibits an employee being treated adversely in their employment on the grounds that they are, or are suspected to be, a person affected by domestic violence.

Employees will also be able to raise a dispute if they believe that their employer unreasonably refused a request made under the new provisions, and must do so within six months.

Overall, it is clear that significant changes will be taking place. Whilst a large portion of it is in relation to Union and Collective bargaining rights, these are all changes that every employer should bear in mind. With various other bills still going through Parliament such as the Equal Pay Amendment Bill ,  Employment Relations (Triangular Employment) Amendment Bill and Holidays (Bereavement Leave for Miscarriage) Amendment Bill, the employment landscape is continuing to change.

There is an onus on employers to ensure that they remain compliant with employment law.

Talk to us

If you have any queries in respect of employment law issues, please contact our Employment Law Team. 

The Burger King Ban and the Importance of Employment Law Compliance

All employers are required by law to comply with minimum employment standards. When an employer fails to meet these standards they risk being placed on a publically available stand down list maintained by the Labour Inspectorate.

The stand down list includes employers who have been subject to penalties for breaches of the minimum standards. Once placed on the list the employer is prevented from supporting visa applications for prospective migrant employees for between 6 – 24 months (depending on the type of breach which has occurred). This can have a real impact on employers who are reliant on hiring visa holders.

Recently Burger King New Zealand was placed on the stand down list by breaching minimum wage requirements. The breach occurred when one of Burger King’s salaried employees worked so many hours that their hourly rate dropped below the minimum wage.

This is a timely reminder that no matter the size, all employers must be compliant with their employment obligations.

We suggest that employers conduct regular reviews of their employment agreements, policies, and procedures to ensure that they are up to date and compliant. In addition to reducing the risk of being placed on the stand down list, regular compliance check-ups also reduce the risk of personal grievances and other claims which can result in losses of time, money and reputation to a business.

There have been a number of changes to employment law recently such as new rules regarding availability of employees to work (“availability provisions”) and cancellation of rosters which can easily catch employers out. There are also a number of changes in the pipeline as the new Government looks to make amendments to 90 day trial periods, the liability of employees who use employment hire companies and a number of other areas.

If you would like a review of your employment agreements, policies or the employment procedures you currently have in place, we are happy to discuss these with you and help you to be fully compliant with your obligations.

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If you have any queries in respect of minimum employment standards, or any other employment law issues, please contact our Employment Law Team.

Triangular Employment Relationships

The Employment Relations (Triangular Employment) Amendment Bill is currently before the Select Committee and if implemented will have major implications for both labour hire companies and employers who hire labour.

The purpose of the Bill is to ensure that where an employee is employed by one organisation, but is controlled or under the direction of another organisation, the employee is not:

  • subject to a detriment with respect to their right to raise a personal grievance;

  • deprived of their right to have coverage of a collective agreement.

Primary Employers and Secondary Employers

The Bill refers to:

1. The “Primary Employer” who is the individual or organisation which employs the employee; and

2. The “Secondary Employer” which has a contract with the Primary Employer for the employee’s labour and has control and/or direction over the employee.

The Impact of Personal Grievances on Primary and Secondary Employers

If implemented the Bill will allow an employee to bring a personal grievance against both the Primary Employer and the Secondary Employer and apply to the Employment Relations Authority to join the Secondary Employer to the grievance.

A Secondary Employer can be joined to a Personal Grievance where their actions resulted in or contributed to the grounds of the personal grievance. Where the Secondary Employer is joined to a grievance the actions of the Secondary Employer are deemed to be the actions of the Primary Employer.

If a Secondary Employer is joined to a grievance, they will be jointly liable with the Primary Employer for any remedies awarded unless the Court or the Employment Relations Authority orders an apportionment of the remedies.

Collective Agreements

The Bill also allows for the Primary Employer to be bound by a collective agreement which the Secondary Employer is a party to, if the employee is:

1. performing work for the Secondary Employer which is covered by a collective agreement the Secondary Employer is a party to;

2. a member of the union party to that collective agreement;

3. not bound by any other collective agreement to which the Primary Employer is a party.

Unintended consequences of the Bill?

The Bill appears to be targeted to labour hire companies and organisations which regularly hire staff in order to run their businesses. However the Bill could have the potential to capture other situations. For example, where an organisation hires cleaners from a cleaning company to clean their offices, the organisation may be considered a Secondary Employer under the Bill.

We suggest that employers watch this space as if implemented this Bill will have an impact on labour hire arrangements.

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

Update on Fair Pay Agreements

Last week the Government announced that a working group to develop a plan to introduce Fair Pay Agreements (FPAs) across entire industries and occupations has now been set up.

The group will be led by former National Prime Minister Jim Bolger.

While we still don’t know how FPAs will work in practice, what we do know is that the Government is looking to use FPAs to set minimum standards for wages and employment conditions like allowances, weekend and night rates, hours of work and leave arrangements for all workers within industries.

It is proposed that FPAs will be determined through collective bargaining between unions and employers within each sector, without the need for negotiations with each individual employer.

FPAs would not make ineffective Individual Employment Agreements or Collective Agreements. They would sit alongside these agreements.

The concept of FPAs is not new. Australia has been using them for nearly a decade now. Whether the Government is intending to replicate the Australian model is yet to be known. It is also not clear what effects they will have on businesses and their bottom lines, though it is to be hoped this will be considered by the Working Group.

The Working Group will make recommendations to Minister for Workplace and Safety, Iain Lees-Galloway by the end of 2018, which will then be considered by Cabinet. The Working Group will be seeking public submissions at some stage. If you would like assistance with or more information on submissions please contact us.

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If you have any queries in respect of Fair Pay Agreements, or any other employment law issues, please contact our Employment Law Team.

Employers need to plan for change

The Labour-led coalition Government has already moved quickly to bring change to some of those areas it campaigned on and employment law is no exception. 

Unsurprisingly, the first moves that have been made and signalled have been where both Labour and NZ First had policies that synchronised – which included 26 weeks parental leave and an increase in the minimum wage. Those announced changes are just the beginning of a wave of employment law changes – some tweaks of the National Government’s previous laws while others are more wholesale changes.

Employment Relations

A number of changes have been announced which may affect SMEs and private employers.  These include:

  •  90-day trial periods will now be limited to employers with fewer than 20 employees.
  • Reinstatement will be restored as the primary remedy to unfair dismissal.
  • Reversing a relatively recent change by the last Government, statutory rest and meal breaks will once again be a requirement.
  • The removal of the SME exemption from Part 6A of the Employment Relations Act 2000, which provides that ‘vulnerable’ employees have the right to transfer to a new employer if the work they were doing is, as a result of restructuring, to be done by another person. 

This last change is likely to be significant for SMEs.  If, for example, a small cleaning company has a contract with a local school, and it is sold to another small cleaning company, all the cleaning employees of the vendor company will have the right to transfer to the purchasing company.  It is very unlikely that there will be any way to avoid this, and it could have a sizeable impact on a business’s future plans.

Fair Pay Agreements

While we don’t know how it will work in practice, the Government is looking towards a standardisation of pay, hours and conditions by industry or sector. They intend to do this through consultation with appropriate stakeholders and the outcomes would set minimum standards for each sector or industry. As well as standard hours and pay, these would cover allowances, overtime, weekend and night rates.

Industrial Relations

In a nutshell, the Government would look to remedy what they see as an imbalance in favour of employers in the current structure of workplace negotiations. To do this, they have flagged intentions to strengthen union access to entering workplace, extend collective rights to contractors, require workers to pay a union bargaining fee, restore the requirements for the employer and union to reach agreement and for unions to be able to initiate bargaining and get rid of penalties to workers for ‘low level’ protest action.

There are other changes mooted in the area of employment law including the extension of the powers of the law to cover anyone working in New Zealand, compulsory redundancy and the abolition of youth rates to name a few.

For employers, the key is to keep yourself informed and up-to-date with what is being discussed at Cabinet level and what the timings and impacts could be on your business. None of the changes mentioned should be a surprise as the Government has been transparent around what they intend to progress. So far, the proposed changes fit within the policies campaigned on. Once you’ve armed yourself with knowledge, it’s a good strategy to plan for change and be proactive rather than wait or procrastinate and be reactive.

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Contact our Employment Law Team today to discuss how we can assist you.

FAQs on Employment

Before the Employment Relationship begins

1. Do I need to have a written Employment Agreement?

Yes, all employees must have a written Employment Agreement which must comply with the requirements of the Employment Relations Act. For example, both the hours of work and the place of work must be specified in the Employment Agreement.

2. Can I use a trial period?

The 90 day trial period can be used by all employers provided they have not employed the employee before (i.e. they must be a new employee). The wording of the trial period must be compliant with the Act and the agreement must be signed before the employment relationship begins.

3. What can I ask in an interview?

You can ask almost anything you want. However, you must be careful to not ask anything which might indicate that you will discriminate against an applicant on prohibited grounds. Such prohibited grounds of discrimination include age, gender, race, religious beliefs, and family status. You are able to confirm, however, that somebody is physically capable of performing the job.

4. Should I check references?

Short answer – Yes. In our view the most helpful question to ask in checking references is “would you employ this person again?”

During the Employment Relationship

5. What are my requirements with respect to pay?

You must pay at least the minimum wage, which is reviewed in April every year. If you provide board and lodging up to 15% of the Employee’s pay can be deducted. However, you can only deduct this if you have the correct clause in your Employment Agreement. This deductions clause stems from the Wages Protection Act 1983 and must provide for an Employee to give written consent to deduction. The deduction clause can, in some circumstances, be used if you overpay your employee by mistake.

6. What are my requirements in terms of leave?

In terms of annual leave, under statute every employee is entitled to 4 weeks annual leave per annum, although employers can naturally provide more if they so wish.

As of 2012 employees can also request to cash up one week of their annual leave, although employers have the right to refuse such a request. Employers can require employees to take their annual leave with 14 days’ notice should the parties not be able to agree on when annual leave is taken.

In terms of sick leave, employees are entitled under statute to 5 days per year having completed six months service. Of course more than the statutory minimum is sometimes provided by employers. Employees are entitled to take that leave when either they are sick, or to care for dependents who are sick. Employers may request evidence of illness after three days’ absence, or after one day’s absence should there be a good reason for requesting a medical certificate (and that proof is requested as soon as possible). Note that if an employer requires a medical certificate after one day’s absence, the employer must meet the cost of getting it.

In terms of public holidays, there are 11 per year and employees must be paid if the public holiday falls on a day which would have ordinarily been a working day. If an employee is required to work on a public holiday they must be paid time-and-a-half for any hours worked and given an alternative day off, that day to be agreed between the parties. It can be agreed between employers and employees to observe the public holiday on a different day.

7. What policies should I have in place?

It is advisable to have policies in place with respect to the following:

1. Health and Safety
2. Use of Internet and Computers
3. Smoking
4. If employees have work vehicles there should also be policies with respect to these.

8. How do I monitor my Employee’s performance?

An employee’s performance should be reviewed each year. Most Employment Agreements provide for this. Performance reviews are often, but not always, attached to pay reviews and these must be undertaken in good faith. Performance review should be meaningful and not just a box-ticking exercise.

If an employee is performing poorly they must take steps to try and lift their performance by providing them with adequate help before taking any further action. This may involve regular meetings and further training.

Ending the Employment Relationship

9. If an Employee resigns what are my obligations?

An Employee must serve out their notice period unless you choose to waive that notice. Following termination of the employment the employee must abide by any confidentiality provisions together with any restraints of trade, including non-competition and non-solicitation of clients or other employees.

10. What are the grounds on which employers may terminate the employment Relationship?

One ground is redundancy following a restructure. A restructure can only be undertaken for genuine business reason. The correct process must be followed which involves consulting with the Employee before making any decisions. Consultation must be in a meaningful way.

The employer can terminate the Employment Agreement for the employee’s breach of the Employment Agreement which generally arises from serious misconduct or sustained poor performance. Strict process must be followed and you are advised to talk to your lawyer prior to making any decisions.

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Contact our Employment Law Team today to discuss how we can assist you.

Is your drug and alcohol policy up to date?

On 2 June 2017 the Associate Health Minister Peter Dunne announced that cannabis product cannabidiol (CBD) will soon be available with a Doctor’s prescription.

Currently the therapeutic use of CBD products is an offence under the Misuse of Drugs Act unless the Ministry of Health gives their approval.

In light of this change we suggest it’s timely to review your drug and alcohol policy to ensure that it is up-to-date and addresses any potential health and safety issues arising from an employee taking prescription medications.

In particular check to make sure that your drug and alcohol policy (or your employment agreement ) requires employees to let you know if they using any medication which may impact on their ability to do the safely.

We also suggest that your drug and alcohol policy is amended to ensure that employees are required to provide you with a copy of their prescription (or information from their Doctor) if they claim a non-negative drug test result is due to taking a prescription medication.

If you would like any assistance with reviewing or amending your drug and alcohol policy and/or employment agreement please don’t hesitate to contact us.

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Contact our Employment Law Team today to discuss how we can assist you.

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