Davenports Harbour Lawyers Blog

Trial Periods Are Here to Stay

Posted by Davenports Harbour | Posted on 25-02-2011

You’re fired! For all NZ employers those are words that can now be uttered without dread of reprisal. The ‘Trial Periods’ legislation introduced in 2009 has been extended indefinitely and for all employers. Previously only those employers with fewer than 20 staff could axe employees without risking wrongful dismissal charges. That has now changed with the Employment Relations Amendment Bill which has been passed in parliament. This law applies equally to all franchisors and those operating under commercial law from April 2011.

Commercial and franchise lawyers still have their work cut out for them though, because dismissing an employee just isn’t as simple as saying “your fired”. Franchisors and other employers must continue to follow a dismissal process in order to take advantage of the Trial Period Amendment. This was made apparent in the case of Smith v Stokes Valley Pharmacy (2009) Limited. In this dispute the franchisors were advised by the court that indeed the application of the law (note this case falls under employment law, not commercial law) should be liberally interpreted because there are sufficient steps an employer must go through in order to rely on the trial period legislation.

This law was, and is, controversial and has labour law advocates pitted against commercial law proponents in an ongoing battle to establish what is fair, for both the employee and the employer or, in the case of a franchise, the franchisor. The law allows employers to dismiss employees within 90 days of work commencement without the employee being able to file a grievance. Commercial and franchise lawyers say the law is working well, citing data from a July 2010 Department of Labour Report which found that 87% of employers thought the legislation was working very well or quite well. Opponents say the law unfairly disadvantages employees and will jeopardise employment stability.

As with every issue there are two sides to the story. What is certain is that the law is here to stay and it offers employers and franchisors more flexibility in terms of controlling their work environments. Nonetheless, any employer considering dismissal should still seek professional guidance before uttering the words, “You’re Fired.”

One Law, One Door

Posted by Davenports Harbour | Posted on 21-01-2011

Category : Franchise Law

Tags: Franchise Blog, Franchise Law, Information about New Zealand government lawyers draft to amalgamate franchise law, relevant for Franchisees and Franchisors

Franchisors be warned! Franchisors will be justifiably concerned about the Ministry of Consumer Affairs discussion paper released in June this year (2010). The paper called ‘One Door, One Law’ seeks to reform current consumer laws (and by extension franchise laws). Not all franchisors and franchisees see the changes as beneficial to either the industry or its users. The discussion paper essentially amalgamates the current consumer based laws, which are relevant to franchise law, into a single piece of legislation. While usually lawyers might agree that less is more, in this instance that may not be the case.

In principle, reducing the number of consumer-based pieces of legislation is a good idea as it provides consumers with a one-stop-shop for establishing their rights in a consumer-supplier dispute, but the fact that the proposed single piece of legislation might infiltrate into franchising (business-to-business relationships between a franchisee and a franchisor) is problematic.

Just last year the New Zealand government spent a large amount of money investigating whether or not the area of franchising needed formal legislation, and it was decided that it did not. Policy makers concluded the detriments of such legislation would outweigh any positives and so the idea was rejected. Now, by doing and saying nothing regarding whether franchising should or will be covered by the “One Law, “One Door” paper, the Government is effectively allowing the possibility for franchising to be legislated through the ‘back door’. This is probably not the ‘one door’ they intended. Nonetheless if the government fails to clarify what is projected in terms of franchise law that may be the unwanted outcome. Franchisors and franchisees will want to follow this debate closely.

Legal Eagles Examine “Status Symbol” Family Trusts

Posted by Davenports Harbour | Posted on 07-01-2011

Category : Trust Law

Tags: Family Trusts

The Law Commission released on 21 December 2010 a discussion paper looking at the use of family trusts in New Zealand, where there is one for every 18 people.

The use of trusts in New Zealand has shot up in recent years, from 145,900 active for tax purposes in 2001 to at least 237,500 in 2008 – the commission said the actual number could be as high as 400,000.

The paper suggests that trusts were seen as something of a status symbol with many people motivated to establish one just because someone they knew had one.

The Law Commission’s paper examines the motivations for establishing family trusts in recent decades – where in the 1950s when they were seen as a means to avoid paying estate duty and other high taxes, in the 1970s as “the obvious vehicle” to avoid matrimonial property having to be equally divided in the event of a divorce, and in 2000, when changes to the tax system increased the top rate of personal income tax to 39% while the tax rate for trusts remained at 33%. In addition, trusts were often used by applicants seeking the residential care subsidy, to reduce their assets in order to satisfy eligibility criteria for the benefit.

In its discussion paper, the Law Commission asks why trusts are so popular, whether the existing law on them is adequate and whether limits should be placed on what they are used for.

http://www.lawcom.govt.nz/sites/default/files/publications/2010/12/trusts_second_issues_paper_72.pdf

“Trial Periods” to be extended

Posted by Davenports Harbour | Posted on 20-12-2010

Category : Commercial Law, Franchise Law

Tags: 90 Days Trial, Employment, Trial Periods

Remember the controversy that surrounded the implementation of the “trial periods” which allowed employers to dismiss an employee within 90 days of that employee starting work for the employer? Well, it looks as though that provision is here to stay, with the passing of the Employment Relations Amendment Bill 2010 (“the Bill”) this year.

Back in March 2009, Government had passed an amendment to the Employment Relations Act 2000, which provided “trial periods” only for employers who had less than 20 staff. Now, from 1 April 2011, any employer can.

The Bill has created quite a stir in some employment specialist groups and political parties throughout New Zealand who say that the ability for an employer to dismiss an employee within 90 days (without the employee being able to take a personal grievance claim for unjustified dismissal) is unfair, disadvantageous to employees and does not seek to promote stability and employment growth in New Zealand.

Other groups and political parties have encouraged the advances the new Bill makes in granting employers more control in an environment which is often seen to favor the employee. These groups have relied on data provided from a July 2010 Department of Labour report which found that 87% of employers thought the “trial period” was working “very well” or “quite well” for them.

Merits of the Bill aside, the real question is how the “trial periods” work in practice. In Smith v Stokes Valley Pharmacy (2009) Limited (which was really the test case showing whether an employer could rely on the “trial periods”), the court found that the “trial period” must be interpreted strictly and not liberally, and noted that there were several other hoops an employer had to jump through in order to rely on the “trial period”.

So, employers beware – it may not be as easy as you think to dismiss your new staff, and if you don’t get it right you could end up in a lengthy and costly court case.

For more information about the 90 day trial period and how it affects you as an employee or an employer, contact a Davenports Harbour specialist today.

Abolition of Gift Duty

Posted by Davenports Harbour | Posted on 13-12-2010

Category : Trust Law

Tags: Abolition of Gift Duty, Gift Duty, Trust

Trust Law: Abolition of Gift Duty

Greater trust scrutiny is on the horizon if the government abolishes gift duties next year. The proposed change will have far reaching ramifications in trust law and asset protection.

On 1 November 2010, the New Zealand Minister of Revenue, Peter Dunne, announced the government’s intention to abolish gift duty with effect from 1 October 2011. Just last week a bill has been put before parliament making the changes. While this is good news for those with trusts (wishing to retain and enhance asset protection opportunities) who are in gifting programmes, it may lead to greater trust scrutiny and perhaps stricter interpretation of trust law.

Because it is more likely that Big Brother will be looking twice at your books after the gift duty is abolished, it will become increasingly important for people to meticulously adhere to trust law in terms of asset protection. While trustees have been fairly blasé about their trusts in the past now they must ensure that trust property is treated with due care. Not as a private entity but as an asset held in trust for the benefit of others. Record keeping and trustee meetings will become more important than ever – yes, that means from here on you should actually have them!

If that isn’t enough to scare your pants off, the Law Commission is currently undertaking a review of trust law and asset protection in New Zealand. The review will consider the various uses of trusts where legal ownership of property is transferred to a trust, but control and enjoyment of that property is retained – somehow government and the retention of enjoyment never do seem to go together. But seriously, the ramifications of that could be far reaching and quite difficult to fathom really.

New regulatory entities such as a central trust register and the compulsory filing of annual trust accounts are also among the ideas that have been raised. While asset protection is still the goal of any proposed new legislation it seems the government wants to tighten trust law to close any loopholes. Any legal changes to trust law are bound to mean onerous record keeping and even more paperwork issues for trustees. We’ll be watching these asset protection and trust law developments closely as they unfold.

Meta Description: Trust Law Asset Protection: Regulatory amendments and government scrutiny surrounding asset protection and trust law.

Trial Periods Are Here to Stay

One Law, One Door

Legal Eagles Examine “Status Symbol” Family Trusts

“Trial Periods” to be extended

Abolition of Gift Duty

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