When an employer is considering making an employee(s) redundant, there are three key steps they need to get right:

  1. Following the terms of the employee’s employment or collective agreement and, in particular, what it says about making employees redundant.
  2. Making sure that the reasons for the redundancy are “genuine”, rather than, for example, simply a cover to remove an underperforming employee. In other words, being able to demonstrate that any redundancy is genuinely justified on the basis of valid commercial grounds.
  3. Following a fair and reasonable process.

At the centre of this is being clear from the start about why a redundancy may be needed in the first place.

This may seem obvious but not infrequently we see employers coming unstuck at this point.  They are unclear and/or imprecise, sometimes in their own minds but, more frequently, when communicating with the employee, about why exactly they are proposing to remove a role and what evidence they are relying on to back up that proposal.

The law is clear that it is not enough for an employer to say or show that it genuinely believes a redundancy is required.  While an employer is entitled to make their business more efficient, whether or not the business is in financial dire straits or not, an employer must still:

  1. Be able to clearly advise the employee, and with sufficient detail, about what the relevant issues are, giving rise to a possible redundancy;
  2. Provide the employee with accurate evidence substantiating those issues; and
  3. Give employees a real opportunity to be able to comment on those issues and, in particular, put forward alternative proposals if they are able to.

This means that, in general, it is not enough to simply advise the employee in broad, imprecise terms, as to why a redundancy is proposed.  For example, to simply say that the employer has reviewed the business and redundancies are necessary to “streamline” the business, improve efficiencies or to save costs.

While those – making a business more efficient or saving costs – can be valid reasons for a restructure, the employee is entitled to know more on the how and why.  The courts have been clear that:

“there must be made available to the other party sufficient information to enable it to be adequately informed so as to be able to make intelligent and useful responses” or, put another way, there must be “the provision of sufficient information to fully appreciate the proposal being made and the consequences of it and, secondly, an opportunity to consider that information and, thirdly, a real opportunity to have input into the process before a final decision is made.”

Consequently, in the example given, this may include providing information on:

  • What the employer’s review of the business showed? What issues were revealed?  For example, “over the past 6 months, we have experienced an X% downturn in work in these areas.  This is as a result of the loss of the X and Y contracts, which, on re-application, were re-tendered to Z Group.  The effect of this on the company is that revenue has dropped over the same period by an average of by X% and productivity by X%.  We are anticipating that these figures will continue over the next Y months because ….” 
  • The evidence the employer has that demonstrate those issues, such as current and projected revenue or productivity figures?
  • What does the old and new employee structure look like under the restructuring proposal? For example, are other roles proposed to be removed? Who will undertake the employee’s existing role (if the duties under it are still required by the employer)?
  • How would removing the employee’s role help address the issues identified by the employer?
  • Have any options, other than removing the employee’s role, already been considered?
  • Could the employee be redeployed?

In our experience, where employers get this right, it reduces an employee’s disquiet and, consequently, the likelihood of an employment relationship issue arising.  It also helps employers make better decisions, more accurately identifying what changes are actually needed and how best to implement them.

Finally, there are some limits on the information employers are required to provide employees.  For example, information which would breach the Privacy Act 1993 or commercially sensitive material, the disclosure of which would unreasonably prejudice the employer’s commercial position.

In these cases, certain information may need to be redacted, before being provided to the employee or, in some circumstances, there may be grounds to withhold particular information altogether.  We recommend however that employer gets advice before doing so.  It is not enough for an employer to simply say they believe withholding information is necessary.  That decision can also be scrutinised and will need to “stack up”.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist you with your employment matters. Please feel free to contact Hannah Carey at hannahcarey@parryfield.com or Carly Armstrongcarlyarmstrong@parryfield.com

Some of the hardest hit by the current Covid-19 crisis are small and medium sized businesses.  The Government has confirmed that they can now apply to their bank for a loan under the Business Finance Guarantee Scheme (the Scheme), set up by the Government in an effort to protect jobs and support the economy during the Covid-19 pandemic.

The Scheme works alongside the Wage Subsidy Scheme which is already available to businesses. The Scheme’s purpose is to help businesses with cash flow and operating expenses in the aftermath of the Covid-19 pandemic.

Not all businesses are eligible for the scheme, however if you are a business with an annual revenue of between $250,000.00 and $80 million you can apply to your bank for a loan of up to $500,000.00 for up to three years. The bank will determine your eligibility and determine the amount available to borrow. Applications under the Scheme are now open and are available until 30 September 2020, or until all available funds, being $6.25 billion, have been exhausted.

Applications under the Scheme can be made through your bank’s website and a standard lending process will be followed through the bank’s credit assessment process to determine eligibility. In addition, banks will take into consideration your circumstances due to the Covid-19 pandemic. The interest rate and other terms of the loan will be determined by the bank under their normal lending criteria.  Of course a basic question needs to be asked – does your business need more debt or can it survive without taking that on?

This is important to think through because all this really means is that the process is similar to getting a normal loan from the bank – the difference being the Government has agreed to guarantee 80% of the risk in relation to each loan with the remaining 20% to be guaranteed by the bank. If a business defaults on their loan under the Scheme, banks will follow normal enforcement procedures and it is likely that as a part of the loan process and terms the bank will have obtained personal guarantees (usually from company directors) or other security (for example a General Security Agreement over the assets of the Company) that they can enforce before relying on the Government guarantee of the loan. The guarantee provided by the Government is essentially a protection for banks who might not otherwise provide loans to companies and not as a protection for the businesses who are the ones that actually take out the loans.

For more information regarding this scheme you can refer to your bank’s website. Participating banks are ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac.  If you’d like to talk through your current position and options then you can always contact us.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist you in your journey. Please feel free to contact Luke Hayward at lukehayward@parryfield.com or Emma Piercey (nee Garlick) at emmapiercey@parryfield.com.

With a large number of businesses not currently operating as they usually would due to Covid-19, many employers are wondering what they need to pay their employees for the upcoming statutory holidays.

This article considers two scenarios (1) where non-essential employees have been working from home over the lockdown period (albeit potentially in a reduced capacity) or (2) not working at all.

In general, employers are still required to pay their employees for statutory holidays that fall on a day that would have “otherwise been a working day” for the employee or if the employee has otherwise agreed to work on that statutory holiday (even if it not a usual working day for that employee).

However, as result of the Covid-19 lockdown, some employees are not able to work at all, giving rise to uncertainty about whether or not the upcoming statutory holidays would have “otherwise been a working day” for the employee or not.  The Holidays Act does not cover off this situation.

The advice below is of a general nature so, if you are considering not paying your employees for the upcoming public holidays, we strongly recommend that you obtain legal advice specific to your situation before doing so.  We are very happy to help if need be.

Non-essential employees working from home over Covid-19 who do not work on a statutory holiday

If an employee would have worked on a Friday or Monday (but for Good Friday or Easter Monday, for example), then that employee is entitled to be paid for that statutory holiday.  This includes an employee who has been working from home over the lockdown period, albeit potentially in a reduced capacity.

In that case, employers must pay their employees not less than:

(a)  The employee’s “relevant daily pay”; or

(b)  The employee’s “Average daily pay” for that day.

These words have specific meanings under the Holidays Act.  However, in general terms, “relevant daily pay” is the amount of pay that your employee would have received had the employee worked on the Friday (Good Friday) or the Monday (Easter Monday).  It can include things like overtime, bonuses and the like, if your employee would have usually received those things as part of their pay.

Consequently, if you have agreed with your employees that, over Covid-19, their pay or hours of work will reduce, then their “relevant daily pay” will reflect those new agreed hours/days of work (making sure you still comply with Minimum Wage obligations).

Likewise, if you have applied for the Government Wage subsidy, and have agreed with your employees that you will only pay them the relevant subsidy amount each day, then that would be their “relevant daily pay” (again making sure you comply with Minimum Wage obligations).

However, if there has been no change to the employee’s pay, you will simply pay the employee their usual daily pay.

If you are able to work out “relevant daily pay”, then this will be the amount you pay your employees.  If it is not possible/practicable to do so or the employee’s daily pay varies at the moment, then you would use “average daily pay”.

The employee’s average daily pay is calculated using this formula:

            a/b

where—

a.  is the employee’s gross earnings for the 52 calendar weeks before the end of the pay period immediately before the calculation is made; and

b. is the number of whole or part days during which the employee earned those gross earnings, including any day on which the employee was on a paid holiday or paid leave; but excluding any other day on which the employee did not actually work.

Non-essential employee working from home over Covid-19 who do work on a statutory holiday

If, however, your employee actually works on the statutory holidays (so long as that is agreed as per their employment agreement), then they are entitled to be paid:

Time and a half, calculated at the greater of

  • the portion of your employee’srelevant daily pay” or “average daily pay” (less any penal rates) that relates to the time actually worked on the day plus half that amount again; or
  • the portion of your employee’s“relevant daily pay” that relates to the time actually worked on the day.

If this would ‘otherwise be a working day’ for your employee, then they are also entitled to an alternative holiday.

Non-essential employee not working from home over Covid-19

The situation is less clear where a non-essential employee has not been working from over the Covid-19 lockdown (because it is not possible/practicable to carry out their usual duties from home due to the nature of their work).

The Holidays Act provides however that, where it is not clear whether a day would otherwise have been a working day, the employer and employee must attempt to reach agreement on this, taking into account such things as:

  • What the employment agreement says – does it cover off what will happen in the event of a pandemic?

Some agreements provide that, in the event of a pandemic resulting in a shutdown, the employer will neither provide work nor pay the employee over that time and the employee will not be required to work.

  • What is the employee’s usual work pattern, i.e. would they usually have worked that day, but for Covid-19, or does the employee generally only work for the employer when there is available work?
  • Whether the employee usually works pursuant to a roster system and what that roster would have provided but for Covid-19.

If agreement cannot be reached, a Labour Inspector can be asked to decide the matter but we anticipate that will be unlikely to occur before the upcoming statutory holidays.

Ideally employers and employee will work hard to try and reach agreement as to how employees in these situations will be paid for the statutory holidays, taking into account both the circumstances of the employer and the employee.    However, while, again, specific advice should be sought on your circumstances, our present view is that, if you have obtained the Government’ Wage subsidy, at a minimum that amount should at least be passed onto employees.  This is based on our current understanding of the Wage Subsidy, which may change if the Government provides further guidance.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Our team is experienced with employment law. We would be happy to assist you in your journey. Please feel free to contact Hannah Carey at hannahcarey@parryfield.com or Lois Flanagan at loisflangan@parryfield.com should you require assistance.

We are aware that a number of employers are unsure at this time about what they need to pay employees and whether they should apply for the Government Subsidy or not.

The Government is regularly clarifying aspects of the Subsidy and the below is our current understanding of how it may apply as at 27 March 2020.

Do employees still have to be paid?

  • As a general rule, where employees are, apart from the shutdown, otherwise willing and able to work, employees are entitled to be paid by their employer. This will be informed by the following however and the terms of each employee’s employment agreement.

What are some possible relevant clauses in the employment agreement?

  • Check to see what the agreement says on such things as unpaid leave, special leave, annual leave, what happens in a pandemic, reducing hours, varying agreements, or, in a worst case scenario, redundancy.
  • Remember however that, any proposed changes to such things as the employees’ usual hours of work or pay, regardless of what the employment agreement says, should be discussed with employees in advance (i.e. consultation, listening to their feedback/suggestions), rather than simply presented to employees. Any agreed variation should also be recorded in writing between the employer and employee.
  • The duty of “good faith” continues to apply, even in these difficult circumstances. In layman terms, “good faith” simply reflects the “golden rule” and means treating your employees like you would like to be treated (or how you might like a member of your family to be treated by their employer).

The Government subsidy – general information

  • See our earlier article here on applying for the Subsidy.
  • Where employees will not actually be physically working or will work for less than their usual hours, say from home, the short-fall, up to 80%, should be recorded as special paid leave.
  • So, if an employee is not working at all, the 80% will be recorded fully as special paid leave.  If the employee is working half their usual hours, half will be recorded as usual wages/salary and the other half, up to 80%, would be recorded as special paid leave.
  • The Government Subsidy must then be used by the employer towards their 80% contribution (or any additional wage payments the employer decides to make to employees).
  • The balance – 20% – will need to be discussed and agreed with employees and could be a mixture/combination of unpaid leave, annual leave, sick leave or additional special paid leave.  If agreement cannot be reached on employees taking annual leave, the employer can direct employees to use annual leave but only on 14 days’ notice.
  • The advice we have received on taxation of the Subsidy is that:
    • the wage subsidy payment will not be subject to GST;
    • the wage subsidy paid to the employer will not be taxable;
    • the wage subsidy paid to the employee, by the employer, will not be deductible; and
    • the wage subsidy is taxable to employees, being included as part of their normal wages and therefore being subject to their usual PAYE, Student Loan, Kiwisaver deductions, etc.

“What are Best Efforts?”

What about if I’m unsure if I can pay staff 80% of the usual wages for 12 weeks or whether I might ultimately have to make employees’ redundant?

  • The terms of the subsidy refer to employers making “best efforts” to retain staff and pay staff at least 80% of their normal income for the subsidised period (in order to qualify for the subsidy).
  • As at 27 March 2020, the Government has clarified that, if an employer has made “best efforts” but cannot pay staff 80% of their usual salary/wages, an employer may still claim the Subsidy but must pass on the whole of the subsidy to their employees.
  • An employer will still need to be prepared to demonstrate the steps it took, prior to that time, to avoid that situation. In other words, what evidence do you have of your “best efforts.”  This could include:
  • Seeking third party financial assistance, such as from a bank or landlord or suppliers (i.e. further funding, mortgage holidays, interest free terms, deferred payments, staggered payments etc);
  • Seeking advice from the Chamber of Commerce, a relevant industry association or your accountant; and
  • Discussing with staff about whether they would be prepared to take their annual leave or sick leave entitlement to top up the Government Subsidy or accept reduced paid hours/unpaid leave.  This could include only being paid the amount of the Government Subsidy, if necessary.
  • MSD will have the ability to check applications and verify information at a later date, including an employer’s declaration at the time of application that they will make “best efforts” to retain staff and pay at least the 80% cap.

What about in a worst case scenario and I need to look at making employees redundant?

  • As at 27 March 2020, the Government has clarified that, in order to claim the Subsidy, employers must keep employees in employment for the period of the Subsidy (even if they are only passing on the Subsidy to employees to keep them in employment).
  • It remains unclear what will happen if an employer claims the Subsidy but then makes an employee(s) redundant but it is possible (but not yet confirmed) that employers may need to repay the Subsidy relating to those employees, or at least, relating to the period of time after the employee’s employment ended.
  • Employers will also need to again be prepared to demonstrate what steps they took to retain staff prior to that time.
  • If a redundancy is undertaken, employers should again check the terms of their employment agreement to see what it provides regarding redundancy. For example, it may define when an employee will be considered redundant, the process that must be followed, what notice must be paid out, and whether any redundancy compensation is payable.  The terms of the agreement will need to be followed.
  • A fair process, carried out in “good faith” will again be required, although consultation will need to be done by email, telephone or applications such as “zoom” and relevant timeframes for consultation and decision making may be able to be reduced.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Lois Flanagan loisflanagan@parryfield.com or Hannah Careyhannahcarey@parryfield.com at Parry Field Lawyers.

The Government will support employers if you face laying off staff or reducing their hours because of COVID-19. But you must meet certain criteria to be eligible – described here.

How much?

The amount involved is paid at a flat rate of $585.80 to a person working 20 hours or more per week and $350.00 to a person working less than 20 hours per week. That is a payment of $7,029.60 for a full time employee and $4,200 for a part time employee.

Criteria to apply?

First, check 2019 revenue against 2020 revenue. Has there been a 30% actual or predicted decline? If so, then you need to confirm:

– the decline is due to the impact of COVID19;
– you will make best efforts to retain staff and pay them (at least 80% of their usual pay). This should be over the – 12 weeks subsidy period;
– you have taken active steps to mitigate lost revenue eg consulting with your bank or advisors; and
– Staff provide consent for details (names, contacts, IRD numbers) to be provided to MSD.

It is worth emphasising that a predicted drop of income will suffice, so employers should put together a list of factors supporting a predicted drop. That could include the obvious, such as staff not being able to work at all but also, where staff can work remotely, not all staff being able to work for 8 hours a day due to technical constraints or clients being in non essential industries.

Other steps to take

We suggest that you document last years revenue vs this year. If you’ve existed for less than a year choose a reasonable month last year to compare with. MSD have noted that they have power to investigate later and it seems likely that some will abuse the system – so best to document both what revenue was and is predicted to be, as well as a list of what steps were taken to mitigate impact.

This article is not a subsitute for legal advice and you should contact your lawyer about your specific situation. If you require any assistance with this, please feel free to contact Hannah Careyhannahcarey@parryfield.com or Steven Moestevenmoe@parryfield.com at Parry Field Lawyers.

We live in unprecedented times. In this short guide we have set out key issues which we think Businesses in New Zealand should be focussed on.

We will update this article as we have further information and expand it more.

Key Information

We recommend looking at this site for the latest Government announcements on COVID-19.

Government support

The government has confirmed that this wage scheme and leave scheme apply to businesses (this includes registered charities, non-government organisations, incorporated societies and other entities). These groups can apply if they meet the qualification criteria. We found that this information was the best to refer to but this summary from Deloitte is helpful as well.

Contracts

Consider seeing what they say about “Force Majeure” events – things outside of your control – there may be provisions which help to delay provision of services or goods at this time. Is some renegotiation needed around the terms? Price? Timing?

Governance

We suggest this is a great chance to look back at your purposes and ensure that they are being followed. Why not also check policies and other rules? We also suggest you ask questions as a governing body to ensure that everyone understands the finances and budgets – how will they be affected? Finally, if you are making important decisions then record them in minutes of meetings. It may be that due to physical distancing you will need to adjust how you have meetings – we use Zoom.

Leases

If you have a commercial lease have a look and see if there is an “Emergencies” clause. If you have such a lease it depends what it says – so it is worth checking your agreement with the Landlord. If you have a recent ADLS version Deed of Lease (which is industry standard) then there is a definition of “Emergency” which includes an epidemic. Clause 27.5 then has provision about access to the property in an emergency – see the screen shot – that refers to “a fair proportion of the rent and outgoings shall cease to be payable…” in some circumstances where you are unable to access the premises as a consequence of the emergency. Use that clause as the basis to talk with your Landlord in the coming weeks.
As a side note, if you only ever signed an Agreement to Lease, don’t panic that it doesn’t have that clause, as the Deed of Lease provisions are deemed to be incorporated into the Agreement to Lease as well (if it is an ADLS form) – see clause 4 of the ADLS Agreement to Lease form.

Other issues

Here are some articles from our website that may be worth a look as well on the topics of good governance, electronic signatures, relief against forfeiture, employer issues, director duties and liquidations.

Questions?

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. For any questions, feel free to contact Steven Moe stevenmoe@parryfield.com or Kris Morrison krismorrison@parryfield.com

The short answer is, it depends. Key factors include what the employment agreement says about varying the agreement, how significant the proposed change is, why there is a need for the change, whether the change is to the employee’s benefit or not and whether the employer and employee agree.

This article considers the situation where the employment agreement states, as is common, “This agreement may be varied by written agreement between the employer and employee”, the change proposed is more than inconsequential and is not to the employee’s benefit.

Good Faith

The starting position is that the employer and the employee are required, when bargaining for a variation to an employment agreement, to “deal with each other in good faith”. At a minimum that means being “responsive and communicative” towards each other and “active and constructive in continuing a productive relationship.”

In short, in the situation outlined above, employers should tell employees well in advance of the proposed change, the reasons for it, and the possible consequences if the change does not go ahead. A possible consequence may, depending on the circumstances, be that the employee’s employment is in jeopardy. However, that should only be raised if that is a genuine possibility, rather than as a threat.

Employees should be given an opportunity to give feedback on the proposal, including any concerns or alternative suggestions. Employers should maintain an open mind to suggestions made and be willing to vary their proposal if feasible.

Employees should also be told, prior to giving feedback, that they are entitled to get independent advice on the proposal and given sufficient time to get that advice, if they so choose.

If an employee’s employment may be in jeopardy if the change does not proceed, then employees should also be given an opportunity to have a support person or representative with them when they give their feedback.

Employees should not simply reject proposed changes out of hand and refuse to discuss them with the employer. They should engage with their employer and be prepared to discuss concerns and put forward alternatives, with a view to trying to reach resolution if possible.

What should happen if agreement is reached?

If agreement is reached, the terms of the existing agreement should be followed in recording that variation. For example, it should be recorded in writing, signed by both parties, and attached to the agreement.

If the change is solely to the advantage of the employer, an employer should also consider offering the employee some sort of “consideration” (i.e. benefit) in exchange, in order to ensure that the change is binding. This could be a one off payment or a pay increase or some other benefit.

While it is not clear legally that consideration is always required where the parties agree to a change, it is prudent to do so to limit the risk of a future dispute.

What if agreement can’t be reached?

This can be a difficult one. On one hand, the law recognises, as a general proposition, an employer’s prerogative to manage or organise its business. On the other hand, that is not an unconstrained right and the terms of the employee’s employment agreement cannot be ignored.

Consequently, where the proposed change effects an express term of the employee’s employment agreement (e.g. their hours of work) and the agreement states that any variation will be by mutual consent, it will be more difficult for an employer to unilaterally effect a change justifiably, particularly a substantial one.

Nonetheless, in some circumstances, a unilateral change may be permitted, where, objectively, that change is “fair and reasonable” and reasonably implemented. Whether any such change meets that test has been said by the Courts to involve “questions of fact and degree”, i.e. how significant is the change and why and how is it being introduced. Consequently, the individual facts of each case will be critical in assessing whether a change is likely to be upheld or not.

Either way, as with changes by agreement, where the change is solely for the benefit of the employer, the employer should offer some benefit in exchange for the proposed change. This also increases the chances of agreement being reached.

Drafting new employment agreements – a take home message for employers

If you are an employer, we recommend that new employment agreements include scope for changes to be made by the employer where business needs justify it. While employers will still need to follow a fair process, in the event of disagreement, more flexible agreement terms potentially provide greater flexibility in implementing change.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance with this, or with any other Employment matters, please contact Lois Flanagan or Hannah Carey at Parry Field Lawyers (348-8480), loisflanagan@parryfield.com or hannahcarey@parryfield.com.

Are you hosting an end of year work Christmas party for your employees where alcohol will be served? It is important that you are aware that you may be liable under Health and Safety legislation, even if the work party is held off-site.

What does the Health and Safety at Work Act 2015 say?

 

Under the Health and Safety at Work Act, employers are required to provide their employees with a safe workplace, protecting them against harm. The Act states the employers must, “so far as is reasonably practicable” ensure that the health and safety of employees is not put at risk. When defining what is meant by “reasonably practicable”, the Act states that employers should weigh up various factors including:

  1. The chance of the dangerous event or risk occuring;
  2. The level of harm that could reuslt;
  3. What the person knows or should know about the hazard of the risk and the ways of eliminating or minimising the risk;
  4. Ways to reduce the risk; and
  5. The cost associated with minimising the risk (and whether doing so is disproportionate to the risk itself).

“Hazard” as referred to in the Act includes where a person’s behaviour has the potential to cause death, injury or illness to a person, and includes whether their behaviour results from alcohol. Therefore, in the case of a work Christmas party where alcohol is being served, the potential for alcohol to affect someone’s behaviour, putting others at risk, is increased.

Employers must reasonably be aware of the hazard of risk occurring, and must take reasonable steps to eliminate or minimise the risk in a reasonably practicable manner. In the context of hosting a work Christmas event where alcohol is being served, reasonable steps to eliminate and minimise risk might include providing plenty of food, providing non-alcoholic drinks and setting limits on number of drinks.

Liability is not excluded just because you are off-site

 

It is important for employers to be aware that liability can arise at work events held off-site. As defined in section 20 of the Act, “workplace” means:

  1. A place where work is being carried out, or is customarily carried out, for a business or undertaking; and
  2. Includes any place where a worker goes, or is likely to be, while at work.

A venue that is used for work events will be considered part of the workplace. This means that even if the work party is held at a venue off-site, you cannot strike out the possibility of liability under the Health and Safety at Work Act 2015, and you must do everything that is reasonably practicable to provide a safe environment for your employees.

Conclusion: Be aware of the risk and put plans in place to eliminate that risk

 

In conclusion, it is important that you are aware of the hazard of risks that could occur, and that you do everything that is reasonably practicable to provide a safe environment for your employees.

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you. If you have any questions arising from the issues raised in this article or relating to any other employment law matters, please feel free to get in touch with us by calling 03-348-8480 or by emailing Lois Flanaganloisflanagan@parryfield.com or Hannah Careyhannahcarey@parryfield.com

The new Government has proposed changes to employment law and this article discusses just some of the key ones which will likely come into force soon. The Employment Relations Amendment Bill 13-1 (2018) is the piece of legislation and sets out those changes here. The introduction to the Bill sets the scene well as it states:

The purpose of this Bill is to implement the Government’s post-election commitments to restore key minimum standards and protections for employees, and a suite of changes to promote and strengthen collective bargaining and union rights in the workplace. The changes are intended to introduce greater fairness in the workplace between employees and employers, in order to promote productive employment relationships.

Let’s take a look at some of the most important changes proposed.

Trial periods for employees

 

This is the headline story and it is worth spending time on. Under the current system a trial period can be used for new employees in certain situations. A trial period cannot exceed 90 days. The employee must be given such an employment agreement that has this provision in advance, and the agreement must be signed before the employee starts work.

The proposed change is that the ability to have trial periods will only apply if the employer has less than 20 employees.

Why does this mean much change? Statistics show that 97% of employers have fewer than 20 employees – this makes it sound like the vast majority will not be affected. But the reality is that such enterprises only employ around 30% of New Zealand’s employees, which means the others are employed by larger entities that will no longer be able to use the trial periodss.

How might this be worked around? Well, what we may see is that entities begin to have multiple subsidiaries each of which employ less than 20 people. It will be interesting to watch this space and see how this change impacts on medium sized businesses which previously had been using the 90 day trial period.

Rest and meal breaks

 

Formerly if you worked a certain amount of time you were entitled to rest breaks. This was changed to allow for “reasonable opportunity” for “appropriate“ breaks. What is proposed now is to go back to a prescriptive mechanism that provides for rest and meal breaks that depend on the hours worked. For example, after 2-4 hours you would get one 10 minute break, or after 4-6 hours you would get a 10 minute break and 30 minute meal break. However, if there is an essential service being provided (think air traffic controllers) then the parties may agree on alternative break arrangements.

Unions

 

This is a big change as the new Government wants to strengthen Union rights and make membership more attractive for employees. The practical relationship between the Unions and Employers will be tested by the new rules.

As some examples:

  • it will make it easier for Unions to access the workplace and employees (compared to previously when permissions were required). The Unions will also be granted greater information about new employees that the employers must share with the Union.
  • In relation to collective bargaining, there are some changes which will probably mean that negotiations continue longer than before (because the mechanism to apply for an Authority to determine if bargaining has concluded or not).
  • There is also a requirement to provide information about the unions to any new employees or prospective employees. The employer can refuse to pass on information but only if it is defamatory.
  • Also, currently an Employer can refuse to bargain for a multi-employer collective (that is, in the situation where there are multiple employers involved). Instead, parties will be required to bargain in such situations.

Reinstatement

 

An employee who has been unjustifiably dismissed will need to reinstate the employee unless the employer can find a reason why they should not be reinstated (this switches the onus back to what it was formerly). Employers will need to consider why it is not practical or reasonable to have the employee reinstated.

Parental leave

 

Currently an employee who meets the right criteria is eligible for 18 weeks paid parental leave but from 1 July that will increase by a month to 22 weeks. By 1 July 2020 this will increase to 6 months (26 weeks). The idea behind the changes is that extended leave will be more possible. The amount paid to the employee is itself not increasing, but the length of time this is payable.

These are just some examples of the proposed changes – for more details on the key issues you may face under the new rules contact us and we would be happy to discuss these with you.

We act for many large employers and assist with their dealings with employees and also are able to offer advice to individual employees on their individual situations from one of our three offices (Riccarton, Hokitika and Rolleston).

 

Contacts
Lois Flanagan, Consultant LoisFlanagan@parryfield.com
Steven Moe, Partner StevenMoe@parryfield.com
Hannah Carey, Partner hannahcarey@parryfield.com

When setting up a company, there are lots of new roles to get your head around. Whether you are a shareholder yourself, or a director in a company, it is important to understand what is expected from the role.

Generally, the constitution of a company determines the rules for how the company is to run. The Companies Act 1993 (“the Act”) often sets out that a company can only do certain things if its constitution allows it. In New Zealand however, a company is not required to have a constitution. Although it is very useful to have, it is not a legal requirement. In the absence of one, the Act sets out the rights, duties and obligations of shareholders, amongst other matters.

 

Shareholders’ Powers

 

Although shareholders are not responsible for, and don’t participate in, the day-to-day management of the company, the Act holds that there are certain powers that only shareholders of a company can exercise. These include:

  • Adopting, altering or revoking a constitution (section 32);
  • Altering shareholder rights (section 119);
  • Approving a major financial transaction (section 129);
  • Appointing and removing directors (sections 153 and 156);
  • Approving an amalgamation (section 221); and
  • Putting the company into liquidation (section 241).

While the appointing and removing of directors is usually done by an ordinary shareholders’ resolution (simple majority vote), the other powers require a shareholders’ resolution to be passed by a majority of 75% (or higher if required by the company’s constitution) of those shareholders entitled to vote, and voting on the decision.

Under section 109 of the Act, shareholders may also question and pass a resolution relating to the management of the company. However unless the constitution says otherwise, the resolution is not binding on the board.

Limitations

 

Shareholders can bring an action against a director for a breach of duty owed to them, but not all directors’ duties are owed to shareholders. Section 169(2) makes it clear that a shareholder cannot bring an action against a director for any loss in the value of their shares by reason only of the loss being suffered by the company.

Reporting Requirements

 

Under section 178, a shareholder may, at any time, make a written request to a company for information held by the company. The company then has 10 working days from receiving the request to:

  • provide the information; or
  • agree to provide the information within a specific period; or
  • agree to provide the information within a specified period if the shareholder pays a reasonable charge to the company to meet the cost of providing the information; or
  • refuse to provide the information specifying the reasons for refusal.

The company may refuse if:

  • disclosure would or would be likely to prejudice the commercial position of the company; or
  • disclosure would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or
  • the request for the information is frivolous or vexatious.

Shareholders’ Exit Strategy

 

Unlike a director, a shareholder cannot just be removed from a company by the other shareholders If problems between shareholders arise, the Companies Act allows a shareholder to apply to the Court to seek orders against the company or other shareholders – for example for the liquidation of the Company. However, this is where it can often be helpful to have a Shareholders’ Agreement which adds to the ordinary rights and responsibilities of the shareholders under the Companies Act. The agreement can set out who can buy their shares, how the shares will be valued, and any restrictions a shareholder may face once leaving, like a restraint of trade. Again, this Agreement isn’t legally required, but it brings clearer rules that are agreed upon by the shareholders.

Conclusion

 

Without a constitution, there are laws in place to govern what a shareholder can and can’t do. However if you have a company with more than one shareholder, you may want to look into getting a constitution and/or shareholders agreement. They can provide greater guidance on matters already in the Act, but can also allow shareholders greater involvement in how the business itself is run.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Kris Morrison krismorrison@parryfield.com or Steven Moe stevenmoe@parryfield.com at Parry Field Lawyers (348-8480)