Legal Insights

Commercial Rent Break?

Can we take a break from paying our commercial rent during Covid-19 lockdown?

The impact of COVID-19 and the unprecedented lockdown have created a lot of uncertainty in business. Non-essential businesses find themselves scrambling to find ways to make ends meet. Many tenants, in particular, are finding they are unable to pay their lease rental and outgoings during the lockdown period.

Taking a break from rent payment is going to depend on what the lease says.  The commonly used Auckland District Law Society (“ADLS”) Deed of Lease precedent, provides a wide-ranging clause which covers situations such as government lockdown as grounds for some rent reduction or even suspension of rent. In particular, the No Access in Emergency clause of ADLS form provides that:

“If there is an emergency and the Tenant is unable to gain access to fully conduct the Tenant’s business from the premises… including restriction on occupation of the premises by any competent authority [which includes New Zealand Government]…then a fair proportion of the rent and outgoings shall cease to be payable commencing on the date when the Tenant became unable to gain access to the premises…”

We are of the view that this clause would apply given that a national state of emergency has been declared and most businesses are unable to access the leased premises to continue operating their business.

An apparent issue with this clause is interpreting the meaning of “fair proportion.” We consider that fair proportion would not necessarily equate to a zero payment but at least a reduction in the rent and in some cases a substantial reduction.

Of course, it is unlikely that the landlord would be bound to agree to the full amount of rent to be waived given that there is some minimal on-going use of the premises for storage of their stock or using the IT systems to facilitate working remotely. There is also the tenant’s share of the outgoings on insurance.

Many tenants then are wondering how much rent reduction they are entitled to. This will depend on the industry, size and the impact of the lockdown on profits. Bear in mind that this is also difficult for the landlords as they may also have mortgage repayment obligations and fixed outgoings to pay on the premises. It is therefore understandable that landlords may not easily agree to a reduction of rent.

Not all leases have this type of “No Access in Emergency” clause so the advice we would need to give you potentially could vary from tenancy to tenancy, so it is important that tenants check and read the fine print of their particular lease to get the right advice for their own circumstances.

If such a clause is present, we recommend that the tenants engage to a discussion early with their landlords. In some cases, it is better to not invoke the “No Access in Emergency” clause at the first instance but an open, honest conversation with the landlord might actually provide a better arrangement.

Other alternatives: Force majeure and the doctrine of frustration

In some other rare instances, tenants may have the right to terminate the lease using the doctrine of frustration or a ‘force majeure’ clause.

Frustration can bring a contract to an end when performance of the contract is rendered impossible by an unforeseen event,  and thus outside the control and contemplation of both parties. Frustration effectively makes the parties absolved of their obligations under the lease. Tenants, however, have to bear in mind that using the doctrine of frustration as a ground for terminating the agreement is assessed at a very high threshold by the Court.

The Supreme Court is unwilling to terminate a contract using Frustration when the main objective of the contract,  based on its terms,  can still be accomplished. The doctrine of frustration is a particularly complex area of law. We recommend that a tenant seeks to obtain legal advice before attempting to rely on this doctrine. It will depend on the lease,  the nature of the business and circumstances of each case.

For example, a temporary change such as a short-term closure of premises would ordinarily not amount to frustration, even if premises are closed for an extended period of time. At the time of writing, the country has been in lockdown for a week, it is unlikely that the tenant has a reasonable certainty that they will be unable to access the premises for a longer period. (It is also worth noting that the ADLS standard lease normally provides a 9 month no access period, so terminating the lease at this stage is unlikely to be a viable option.)

Given the complexity of the doctrine of frustration, tenants may invoke a ‘force majeure’ clause if it’s included in the contract. Force Majeure is a clause designed to release a party from fulfilment of its contractual obligations as a result of uncontrollable events. This type of relief could be used as an alternative to the doctrine of frustration.

It is arguable that a pandemic amounts to a force majeure but relying on a ‘force majeure’ clause will depend on the wording of the contract. In some contracts, it can provide for cancellation of the lease and others may suspend the lease during the uncontrollable event. Essentially, the use of ‘force majeure’ clause depends on the specific wording of the contract.

If you are a tenant and in a situation where you do not know what your rights and obligations are, particularly in these uncertain times, our commercial team is able to review your lease and advise you accordingly.

We highly recommend that you do not withhold any rent payment without advising the landlord of your intention, otherwise the landlord is entitled to charge penalty interest for the rent in arrears.

Contacts:

This article is published for general information, interest and discussion purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.

Legal Insights

Recruiting Migrant Workers from the Philippines

Migrant workers from the Philippines are becoming an important source of labour to a number of New Zealand employers.

When you recruit from the Philippines you must follow the legal requirements of the New Zealand and Philippine governments. Immigration New Zealand (INZ) is responsible for deciding the visa applications of the migrants while the Philippines Overseas Employment Administration (POEA), a Philippine government agency, is responsible for granting exit clearance to Filipino workers. In other words, the POEA deals with workers when they leave the Philippines, and INZ deals with workers when they enter New Zealand.

There are typically two ways to recruit Filipino workers by either using a New Zealand recruitment agent to recruit on your behalf, or working directly with a POEA licensed recruitment agent in the Philippines.

Under the Philippine law you will be required to cover recruitment, relocation and immigration costs for employees from the Philippines unless you decide to employ the Filipino workers through a New Zealand recruitment agent who then becomes the employer of the Filipino worker. By doing so, you could avoid the upfront cost as recruitment agent recoups costs by building a margin into their charge-out rate over the course of the employment agreement. You have to weigh carefully which option is appropriate for your business.

O'neal Mendoza
O’neal Mendoza, Solicitor

If you want to explore your options and to know more about hiring Filipino, we have expertise to provide legal service on the legal requirements for both New Zealand and Philippine governments.

For more information contact O’neal Mendoza

 

 

Legal Insights, Uncategorized

Recruiting Overseas Workers.

Options for Employers recruiting overseas workers:

Becoming an Accredited Employer 

There are a range of options for those wishing to employ skilled workers from overseas.

If your business has an ongoing need for skilled workers, you could either obtain an Accredited Employer status from Immigration New Zealand (INZ) or request for an Approval in Principle to streamline a seemingly complicated and stressful application process to get work visas for your potential employees.

  1. Employer Accreditation

An employer holding Employer Accreditation status is able to employ skilled migrant workers without first having to check if any New Zealanders can do the work.

The accreditation enables you to employ overseas workers for an initial period of up to 30 months. You must take direct responsibility for the workers you employ, for their work and you must pay a minimum base salary of $55,000.

Once you obtain the accreditation and it has been held by an employee for at least 24 months, the employee can be eligible to apply for residence provided other criteria are met.

This pathway to residency will attract many migrants workers to work for you as most of the migrants are not normally eligible to apply for residence under the ‘Skilled Migrant’ category.

Employer Accreditation will be granted initially for 2 years but you can apply to renew your accreditation status for further 2-year periods or in some cases for 5 years.

Application requirements

You must show that you need to recruit migrant workers and you will have direct responsibility for those employees and their work output.

In the assessment of an application for accreditation INZ must be satisfied that you:

  • Are in sound financial position;
  • Have high-quality HR policies and practices;
  • Have work place practices and history of legal compliance; and
  • Are committed to training and employing New Zealanders (including the number of local people already employed; evidence of training local workers; extent and nature of past advertising; engagement with Industry Training Organisations and union).

The documentation required to satisfy these elements is relatively extensive, but we can provide you with advice on exactly what is needed, and how to structure an application.

As part of its assessment, INZ may carry out an interview with an employer or a site visit of the employer’s premises.

It is important that you are prepared to provide extensive documentation to satisfy the above criteria. To avoid delays and possibility of being declined, you have to make sure that such materials are thoroughly gathered and assessed prior to submitting your application.

If you wish to discuss the possibility of your business becoming an accredited employer or assist you with your application in the form required by INZ, please contact me.

 

O'neal Mendoza
O’neal Mendoza, Solicitor

O’neal Mendoza

Contact Details

DDI: 09 837 5745

Email: omendoza@corbanrevell.co.nz

 

PLEASE NOTE:

  1. Any policy statements mentioned in this article do not replace the policy of Immigration New Zealand.
  2. Assessment requirements are subject to change.
Legal Insights, Uncategorized

Employment Relations Amendment Act: What You Need to Know

The Employment Relations Amendment Act 2018 (“the Act”) was passed into law on 6 December 2018 and received Royal Assent on 11 December 2018. The Act prescribes that the changes will come into effect in two parts. The first set of changes came into effect on 12 December 2018. The second set of changes will come into effect on 6 May 2019. Here is what you need to know:

Changes that came into effect on 12 December 2018:

Union Access and Collective Bargaining:

  1. Union representatives can now enter workplaces without consent where the employees are covered under, or bargaining towards, a collective agreement. This right does not extend to workplaces that are also places of residence.
  2. Pay deductions can no longer be made for partial strikes.
  3. Businesses must now enter into bargaining for multi-employer collective agreements if asked to join by a union. They will not have to settle a multi-employer collective agreement if their reason for not wanting to settle is based on reasonable grounds.
  4. An employee’s ability to complain of discrimination on the basis of their union membership status is enhanced. Employees now have 18 months, an extension of 6 months, to complain of the behaviour.
  5. Earlier initiation timeframes have been restored for unions in collective bargaining, enabling a union to initiate bargaining 20 days ahead of an employer.

Remedies:

  1. Reinstatement will be the first course of action considered by the Employment Relations Authority. The employee must be successful in their personal grievance for an unjustified dismissal and have requested reinstatement for this to be the primary remedy.

Changes that will come into effect on 6 May 2019:

Rest and Meal Breaks:

  1. The right to set rest and meal breaks will be restored, the number and duration of which depends on the hours worked.
  2. Employers must pay for rest breaks but don’t have to pay for meal breaks. Employers and employees will agree when to take their breaks. If they cannot agree, the law will require the breaks to be in the middle of the work period, so long as it’s reasonable and practicable to do so.

90 Day Trial:

  1. 90-day trial periods will be restricted to businesses with less than 20 employees. Businesses with 20 or more employees can continue to use probationary periods to assess an employee’s skills.

Vulnerable Employees:

  1. Employees in specified ‘vulnerable industries’ will be able to transfer on their current terms and conditions in their employment agreement if their work is restructured.
  2. The exemption allowing employers with 19 or fewer employees to choose not to take on existing employees if they win a contract has been removed. All businesses that take over a contract that involves “vulnerable” employees will have to employ the people currently doing the work on the same terms and conditions.
  3. An employer must provide notice to vulnerable employees of the right to transfer no later than 25 days before the restructuring will take effect. The employer must also advise the employee’s that they have 10 days to make the election to transfer.

Union Issues and Collective Bargaining.

  1. The duty to conclude bargaining will be restored for single-employer collective bargaining, unless there are genuine reasons based on reasonable grounds not to.
  2. The 30-day rule will be restored. Any new non-union employees must be employed on the same terms and conditions of employment for the first 30 days of employment.
  3. Pay rates will need to be included in collective agreements, along with an indication of how the rate of wages or salary payable may increase over the agreement’s term.
  4. Employers will need to provide new employees with an approved active choice form within the first 10 days of employment and return forms to the applicable union, unless the employee objects. The form gives employees time to talk to their union representatives before considering and making a choice about whether to join a union or remain on the individual employment agreement.
  5. Employers will need to allow for reasonable paid time for union delegates to undertake their union activities.
  6. Employees will need to pass on information about the role and function of unions to prospective employees. Unions must bear the costs if they want printed materials to be passed on.

If you have any questions or need assistance with any employment issues, please contact: Rachel Nightingale on 09 837 5734

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Rachel Nightingale, 

 

 

Legal Insights, Uncategorized

Employer’s Guide to Disciplinary Action

In QWI v the Great Gatsby Ltd [2017] NZERA Wellington 52 the Employment Relations Authority determined that a chef who, on the balance of probabilities had attempted to sell methamphetamine to her colleagues whilst at work, was unjustifiably dismissed. This is because in order for a dismissal to be lawful it must be substantively justified and procedurally fair. Employers will frequently have good reason to discipline an employee, but the correct process must be followed.

Before taking any action against an employee an employer must:

  • Sufficiently investigate the allegations against the employee;
  • Properly raise their concerns with the employee;
  • Give the employee a reasonable opportunity to respond to the employer’s concerns; and
  • Genuinely consider any response given.

The Disciplinary Process:

  1. Investigate the Allegations

An employer must act without delay when they become aware of an allegation of misconduct. The initial step is to begin an investigation into the allegations raised. The employer should inform the employee before the investigation begins that they will be investigating into an allegation of misconduct. Explain to the employee the details of the allegations, the seriousness of the allegations, and that they may have a representative present at all meetings. The employee should then be invited to an investigation meeting where they will be interviewed and explain what happened. The employer should interview any witnesses and ask them to provide statements. At the conclusion of the investigation an employer should decide whether it is appropriate to proceed to a disciplinary meeting.

  1. Disciplinary Meeting

If it is appropriate to proceed to a disciplinary meeting the employer should inform the employee in writing that they will be required to attend this meeting. An invitation to a disciplinary meeting letter should state the allegation, refer to relevant clauses in the employment agreement or company policies, state who will be involved in the decision making process, when the meeting will be, the possible consequences of the meeting if the allegation is established, and that the employee has the right to bring a representative. Any information gathered during the investigation that the employer will rely upon to make their decision should be attached to this letter. The employee should be given at least 48 hours’ notice of a disciplinary meeting to ensure the employee has enough time to prepare for the meeting.

In the disciplinary meeting set out the allegations and concerns and invite the employee to respond. If the employee’s explanation gives rise to a need to further investigate the meeting should be adjourned so this can take place. If you investigate further make sure you give any additional information to the employee to comment on.

  1. Decision

An employer should wait at least 24 hours from the time of the disciplinary meeting to communicating a preliminary decision. An employer should use this time to give the matter objective consideration. If it is concluded that the allegation has been made out the employer should inform the employee of their preliminary decision and give the employee a chance to comment on the proposed outcome. The employer should then adjourn this meeting to consider any further comments made by the employee for at least 2 hours before making a final decision.

The employer should then communicate the final decision to the employee and confirm this in writing. The employee should be informed that the outcome will remain on their personnel file. A warning letter should detail what conduct is prohibited and include what may happen if there are further instances of misconduct.

Where an allegation is one of misconduct the disciplinary outcome will usually be a warning. If the same type of misconduct happens again further warnings may be issued following a disciplinary process, until the employee is ultimately dismissed. Typically an employee will receive 3 warnings before dismissal but this is subject to what is in an employee’s employment agreement or in the employer’s policies.

Where an allegation is one of serious misconduct the outcome will usually be a final warning or dismissal. Serious misconduct undermines the trust and confidence an employer has in an employee and generally requires an employee intentionally performing an act knowing it was wrong. Misconduct does not require that same level of intent. If the employee is given a final warning and the same type of serious misconduct happens again, subject to what is the employee’s employment agreement or company policy, the employer may dismiss the employee.

Our Top Tips:

  • An employer cannot dismiss someone without first going through a disciplinary process, no matter how serious the allegation.
  • If an allegation is so serious that the employee cannot continue working, you should suspend the employee whilst you complete your investigation and go through a disciplinary process.
  • Always follow any disciplinary process agreed to in employment agreement or policies.
  • An employer cannot discipline an employee for being genuinely ill. If an employee is genuinely ill for extends periods of time this should be dealt with through a medical incapacity process.
  • There is a difference between misconduct and poor performance. Misconduct should be dealt with through a disciplinary process and performance issues should be dealt with through a performance improvement plan.
  • Always be fair and reasonable. Sometimes there may be an innocent explanation for suspicious circumstances.
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Rachel Nightingale, Law Clerk

This article is a brief guide on how to take disciplinary action against an employee. This should not be used as a substitute for legal advice. If you have any questions or need assistance with any employment issues, please contact Rachel Nightingale on 09 837 5734.

Email: rnightingale@corbanrevell.co.nz