Legal Trends : Lawful implications – Act attack

Whatever post-election world might bring in terms of shifts in legislative direction and their possible effect on business, the forces currently impacting on legal activity are economic. It’s no secret that New Zealand is in the throes of an economic slowdown and that has affected the types of legal issues lawyers find themselves dealing with on behalf of business clients.
Every law firm approached to comment for this story agrees there has been rise in the number of insolvencies and companies restructuring, while private equity deals or merger and acquisition activity is reducing.
“The work mix has certainly changed lot in the last 12 months, there’s no doubt about that,” says Chapman Tripp managing partner Andrew Poole.
In fact the increase in insolvencies and companies restructuring has prompted Chapman Tripp to create two new partnership roles specialising in those areas. Although things are quiet in mergers and acquisitions, companies have focused on other projects such as outsourcing, particularly in the IT industry.
There are three ‘R’ words that keep cropping up.
Yes, recession is official. However most lawyers suggest that perhaps the next year might be bit bumpy, but after that the New Zealand economy will start to improve. In the meantime the legal industry itself is not immune to the effects of slower economy. The firms suffering most are those focusing on the property industry.
Which leads to the second ‘R’ word. Redundancy is something that has been bandied about in the legal industry though there’s understandably few prepared to admit it might be happening in their own firm. Simpson Grierson chairman Rob Fisher says he has heard stories about redundancies in the industry, however he says that no staff will be laid off at the firm.
“Our board has just reviewed our last strategic plan and is developing plan for the next three years. We are not looking at it on the basis that we are in recession therefore we should be cutting back. I think we are continuing to invest in people and business for the recovery that will inevitably follow,” Fisher says.
Hesketh Henry managing partner Erich Bachmann says he has seen no concrete evidence of staff being laid off but he has heard of some instances of it happening. “I think it is fair to say people might be bit more cautious in recruitment decisions,” Bachmann says.
Buddle Findlay partner David Thomson says the only ‘R’ word he’s focused on is recruitment.
“There is no need for redundancies at Buddle Findlay,” he says.
“There have been stories in the market about some of the smaller property-based law firms getting themselves into position where they do need to make staff redundant. But there is no indication of larger firms making people redundant,” Thomson says.
Poole believes there will be flight to quality and it’s possible some mid-tier firms will merge.
“I know one firm has been talking around town trying to find another firm to merge with. It’s not mindless speculation,” Poole says. “I think the pressure really will go on in the next year or so – three to five years to be safe.”
He also worries about the trend of corporate law headquarters moving offshore meaning most of the legal work disappears too.
“Making sure we retain decent corporate business is vitally important for the New Zealand economy,” Poole says.
Bachmann says there is no need to wander around talking doom and gloom. “That tends to develop into self-fulfilling prophecy,” he says. “There are always opportunities around that can be looked at.”
One area which is providing more legal work is infrastructure. Energy and transportation projects are the main areas where law firms have been involved. Corporate clients are also investigating possibilities in helping the Government expand the fibre-optic network.
Succession planning could be another growth area in future, Bachmann suggests.
“Statistically there is evidence put out, particularly in the last couple of years, which shows lot of business owners are in their 50s and 60s. There comes time they might want to find buyer or put some succession plans in place. I suspect that would be quite an active area in the medium to long term,” he says.
Meanwhile, there have been plenty of legislative changes relating to employment that are still filtering through the business sector. Employment lawyers are busy with the recent introduction of KiwiSaver, legislation enforcing flexible work arrangements and compulsory meal breaks.
Last year employers faced the logistical problem of getting their payroll departments ready for KiwiSaver’s introduction. Then the impact of compulsory contributions hit this year.
DLA Phillips Fox partner Sue Brown says the Government believed employers were paying less to people in the KiwiSaver scheme to avoid the financial impact of their own contributions rising from one percent to four percent in 2011 depending on the November 8 outcome. She says she hadn’t heard any evidence of that but the Government’s answer was to introduce legislation to say KiwiSaver contributions were to be on top of salary or wages.
The longest running problem has been for employers who had existing super­annuation schemes before KiwiSaver. Some have converted these schemes to comply with the Government’s scheme, others have disestablished their own schemes.
A future concern for employers comes with the refining of the financial services sector.
Currently if person gives financial advice they have to make certain disclosures about their experience in the industry to the person they are advising. Obligations to do so will soon become even greater.
“One of the issues is that it is possible an employer might be seen to give financial advice about KiwiSaver,” Brown says.
She is working to ensure employers are not caught by piece of legislation which is unrelated to their usual activities. Aside from this Brown believes things are settling down in relation to KiwiSaver.
“I think once the system is in place, it will operate and everybody will take it for granted,” she says.
The reality is the impending election could impact on the future of KiwiSaver and things might get busy in the legal area depending on decisions made on policy related to the scheme.
Kiely Thompson Caisley employment lawyer Kate Ashcroft says legislation related to flexible working arrangements and compulsory breaks is an example of the Government going further into legislating with regard to employment issues than it has before. Most employers with grievances about the new legislation wonder how they can comply with the law when they already have arrangements in place.
While Ashcroft questions the necessity of these new laws in light of the principles of good faith set in the employment relationship, she says they will require some to change their work practices.
Also set to impact on business is legislation designed to deal with the realities of climate change and the need to operate in carbon-constrained world. The impact of climate change on business is probably one of the biggest growth areas in law and one in which DLA Phillips Fox partner Helen Atkins is developing specialty.
She explains there are two aspects – carbon emissions and carbon sinks.
So far the only sector currently affected is forestry – that’s one of the sinks. Forestry takes carbon and other greenhouse gases out of the air. Forestry companies are now trying to maximise the advantage this gives them.
“Firstly they are finding out what sort of value accountants and other specialists can audit in terms of how many units of carbon those forests are able to sink and have the capability of achieving. But the way the legislation has been drafted has meant there is doubt about what the forestry sector is or is not entitled to,” Atkins says.
Once that happens forestry companies can register on the greenhouse emissions trading register to sell carbon units they are able to sink. Companies that buy them will of