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In a turbulent environment for small business owners and investors alike, several amendment Bills come into effect this year, while further legislative amendments to laws are being debated by Parliament. The changes could spell significant adjustments to business operations and insurance as a result.
An overview of key legislation that comes into effect this year, as well as Bills before Parliament which may impact New Zealand businesses.
There are numerous employment law reforms coming into effect during 2021.
Legislation to increase the minimum wage and sick leave entitlements have already been introduced, while reforms, such as the implementation of Fair Pay Agreements, are likely to be rolled out within the coming year.
The Government introduced the Holidays (Increasing Sick Leave) Amendment Bill in December 2020, partly in reflection of the social and economic changes Covid has brought about. If the Bill is brought into law it will increase minimum sick leave entitlements for New Zealanders from five to 10 days per year, but keep the current maximum entitlement allowing unused sick leave to be carried over up to 20 days annually.
Increased sick leave entitlements will not happen all at once. Existing employees will have to wait until their next entitlement date before they receive the increase.
However, new legislation could also allow employees to take sick or annual leave when needed on an accrual basis, instead of waiting for an employment anniversary. In practice, many employers already permit employees to take annual leave in advance of entitlement on an accrual basis, and some employers also allow employees to take sick leave in advance of entitlement.
Changes to both bereavement leave and family violence leave are also likely. Government has indicated it intends to allow employees to take leave for these reasons as needed, and without parameters around timeframes.
The Pay Equity Amendment Act 2020 has also recently come into force. Under this Act the Government is aiming to increase transparency by requiring detailed records of pay equity across all industries, including information on ethnicity, age, and gender. Improved transparency is intended to allow people to more easily see where problems lie, and help streamline pay settlement negotiations where needed.
The Government is seeking to implement Fair Pay Agreements for New Zealand. These set out the minimum accepted terms and conditions across an entire industry or occupation, rather than setting them for individual businesses.
Other employment legislation changes on the horizon could include workers in small businesses being able to elect health and safety representatives, as well as raising the age of workers allowed to perform ‘hazardous work’ from 15 to 16 years old, which could have implications for employers with trainees or apprenticed employees.
The Trusts Act 2019 has already come into force. Its aim is to provide transparency and clarity in regard to trust law and is the first major trust law reform in New Zealand in 70 years. Many of the key changes are aimed at making trust law more accessible, and to strengthen the ability of beneficiaries to hold trustees to their obligations.
Among other changes, the Trusts Act incorporates a new concept of classifying trustee duties as either ‘mandatory’ or ‘default’. Mandatory duties must be performed by the trustee and may not be modified or excluded by the terms of the trust, while default duties may be modified or excluded by the terms of the trust, subject to certain limits.
‘Trust information’ is information that is reasonably necessary for the beneficiary to have to enable the trust to be enforced. The trustee has an active duty to consider at ‘reasonable intervals’ whether the trustee should be making the basic trust information available. The new Act states that this should become a routine part of trustee meetings.
However, under the new Act the reasons for trustee decisions are not required to be disclosed.
Another option opened up by the Trusts Act 2019 is the ability to appoint a ‘special trust adviser’ to advise the trustee. A special trust adviser will not have the power of a trustee, and the trustee will not be bound to follow their advice.
Anyone who is a trustee, or the beneficiary of a trust should consult with their trust advisor or solicitor on what these changes might mean specific to their affairs.
Another relatively new piece of legislation is the Healthy Homes Standards for rental properties in New Zealand. With research suggesting that, overall, rental properties are of a poorer quality than owner-occupied homes, the new standards are designed to help improve the wellbeing of New Zealanders and their families. The same research shows a link between cold, damp and mouldy homes, and negative health outcomes, particularly for illnesses such as asthma and cardiovascular conditions.
All rental properties must now have one or more fixed heaters in them, which can directly heat the main living room. It is important for rental property owners to note that some heating devices are deemed inefficient under the requirements of the new standard.
Ceiling and underfloor insulation has been compulsory (where it is ‘reasonably practicable’ to install) in all rental homes since 1 July 2019. The new standards split New Zealand into three climate-related zones where insulation needs are measured by minimum ‘R’ values (meaning “Resistance” ie. how well insulation resists heat flow).
Adequate ventilation is another requirement highlighted by the new Healthy Homes Standards. Rental properties must have at least one door or window (including skylights) that opens to the outside in all bedrooms, dining rooms, living rooms, lounges, and kitchens. All kitchens and bathrooms must also now have an extractor fan that ventilates externally.
Efficient drainage for the removal of storm water, surface water and ground water, and the requirement that rental property owners block any unreasonable gaps and holes in walls, ceilings, windows, and floors to mitigate noticeable draughts make up the remainder of the new standards.
From July this year, private landlords must ensure their rental properties comply with the Healthy Homes Standards within 90 days of any new, or renewed, tenancy. By 2024 all rental properties in New Zealand must comply with the standards. For more detail on the standards, visit the Tenancy Services website.
Rental property improvements undertaken by landlords could have a knock on effect to the property’s insurance cover. And landlords may need to review their insurance policies accordingly.
Several reforms to the original Residential Tenancies Act 1986 took effect late last year that were designed to strike a balance between protecting the interests of landlords, and improving security and stability for tenants.
Key changes include the minimum period between rental increases being raised from six to 12 months; landlords no longer being able to end a periodic tenancy without reason; and the prohibition of landlords soliciting tenant bids by advertising a property without stating a rental price.
The amendments to the Act also allow tenants to add minor fittings and make small, reasonable changes to their premises where the installation and removal of the fittings is considered low risk.
With tenants able to make such changes to the rental property, landlords are encouraged to review their home insurance coverage should additions or changes could have a knock-on effect.
Published April 2021