Matters of Law
The scales of justice are increasingly being loaded with more “compliance requirements”. Kevin Kevany looks at how this is impacting on the relationship between lawyers and business owners.
alk to a number of New Zealand lawyers and the one thing you can be sure of is that you will get a number of different opinions across a range of subjects.
Ask them how business owners and managers can get more out of their legal advisers and you have a near-heavenly choir in harmony. And it is said to be for your benefit.
So park your cynical views of the legal profession; put behind you all those vicious and derogatory jokes you delight in forwarding; and get some free advice – reason being, we are in for more and more legislation on the employment front, curved balls like the Climate Change Bill, carbon trading, more on health and safety, and insolvency, at the very least.
You could be spending a lot more time with your legal beagle.
New Zealand might still rate very competitively in regard to the ease of starting a business and the lack of red tape as you launch your enterprise, but the reality of what comes next in achieving the holy grail of "compliance" is becoming daunting even for trained legal minds, who are no longer afraid to admit it.
All of that even before mention is made of the further tightening of credit and lower margins forecasters are now in unison on. Small legal firms themselves are battening down the hatches for the next year or two as they anticipate their bread ‘n butter conveyancing business will taper off.
The corporates with their large human resources departments and serried ranks of consultants will be largely able to cope, but the traditional small enterprises – be they a dairy or a handful of plumbers working together – are in for more of the same as existing legislation is endlessly tweaked and new fronts open up. There is the ongoing saga of Kiwisaver (how to treat casuals, after a number of hours worked) ; "vulnerable employees" like cleaners when ownership changes and, what some predict will be another time-bomb; and the Employment Relations (Flexible Working Arrangements) Amendment Act 2007, which will empower an employee to take a personal grievance claim to the Employment Relations Authority (ERA). And ERA determinations under the Act cannot be challenged to the Employment Court, except by judicial review. All of this will keep employers and their lawyers busy.
While everyone is talking
Do all of your employees have a written agreement with you? Did you make sure they got it before they joined – so they had time to negotiate or walk away?
Given that we are headed for an economic slow-down, best case, make sure that your commercial agreements truly reflect the company situation, as all the players believe it should. If you are the inventor of a product or process, do ensure there is clarity on where those rights reside. Sort yourselves out, "while everyone is still talking", advises Nick Hodson, a partner at Minter Ellison Rudd Watts.
Ashley Balls, widely experienced in legal circles in the UK, the East and here, and a columnist in NZBusiness best encapsulates what many are saying: "Get yourself a ‘savvy arrangement’ with someone. Go to a [legal] firm which truly understands what it is that you do and ensure you develop an understanding of mutual benefit."
While all the lawyers were united in calling for proactive involvement, many recognised that shelling out fees on a "get-to-know-you" basis would not be a priority for most in tightening economic times.
Here, at least, there is some good news: it’s a buyers’ market. The game has changed.
"A generation ago, all a lawyer had to do was ‘explain and do’, before billing you. The boot is now on the other foot. Clients call and want to know what the charges will be upfront, taking control of the relationship. Equally importantly, we have gone from a situation of one lawyer serving 850 people to a 1:430 ratio – that is, there’re now nearly twice as many lawyers."
Greg Milner-White, a senior associate at Kensington Swan, rated locally as sixth in size and effectively the largest of the medium-sized firms (or the smallest of the big firms), echoes the call to "educate your lawyers".
"In addition to understanding your business, your legal advisers must be commercially focussed and provide you with an ‘added value’ component, otherwise their advice is not as useful as it could be. At the beginning of a relationship, we will invest the time, visit your facility, because we believe we are in a competitive business and it is part of the ethos of our company to do so," says Milner-White.
Commoditisation of law
Howard Thomas, a principal at Lowndes Associates, a specialist, boutique practice with about 20 lawyers, believes establishing the relationship between the SME owner/manager is "the single biggest issue we face" given the "commoditisation of law which exists today".
Yes, legal services have been turned into a commodity, with little differentiation.
"We have to persuade potential and existing clients to make proactive use of our services. If cost is an over-riding issue, we will re-direct clients on a ‘horses for courses’ basis. Most firms will have the technical competence to perform the majority of tasks. Timeliness, we believe is the great differentiator which enables us to add unique value and cost efficiencies."
To become a prized, trusted business adviser, rather than an ad hoc provider of legal advice ("the ambulance at the bottom of the cliff scenario"), Thomas believes that good personal relationships are vital. "Lowndes" has many relationships that have been going for 25 to 30 years; with nearly 75 percent of their turnover, repeat business.
"Very occasionally, you might need the pre-eminent lawyer in the country on a specific issue, but mostly if you have a single point of responsibility, within the company at a very senior level, with a lawyer who is right up to date with your issue, you are going to be a lot better off," he says.
"Minters" (Minter Ellison Rudd Watts) is the local partnership of the dominant Australian firm, which in turn is one of the global giants. Nick Hodson, adds the proverbial cautionary tale and puts in a punt for the bigger firm, even when serving SMEs.
"No lawyer is an expert in every aspect of law. Small firms do not like admitting that. If you think about it, you don’t get your builder to do the electrical fit-out or the plumbing. And even when you take plumbing, there are very different skills and experience when it comes to the specific knowledge needed to handle your solar water heating or your swimming pool problems."
That’s all very well, you might say, but if you are running lean-and-mean like most small businesses and you decide it is a good idea to start a proactive relationship and integrate the legal firm as an adviser rather than the specialist rescue team, how do you go about it? Where do you start, without spending a fortune?
Hodson is ‘to the point’, as ever: "Google the firm and the individual you have had recommended to you by colleagues in the same or similar businesses. Phone the local Chamber of Commerce, or The Icehouse, or if you have a mentor, ask for their advice.
"Then, give that firm/individual lawyer a small job, to test and see whether you could work with them long-term. Failing that, most firms will give you an hour and a pitch before they start charging."
Best check on that first though, since some lawyers might only toss in ten minutes, unless you negotiate something different.
Not all doom and gloom
David France, a partner at Kiely Thompson Caisley, believes the legal situation, particularly on employment issues is not all doom and gloom, as the Labour government has largely completed its restructuring in this, their key ideological area.
"The major changes, post ’99, have largely happened. Yes, there will be some tweaking going forward, but no dramatic change in what has become an area where it is virtually impossible to keep up with the plethora of changes in legislation, whether you’re a corporate or a corner dairy," says France.
He cautions all businesses to ensure they are compliant with the latest [law] changes and to accept compliance overheads as a cost of doing business. Whatever you do; don’t dabble.
"Most people want to run a business that is in compliance with the legal situation. But it is a struggle to keep up with the changes. You can get into a position where just because you have not had a problem in the past you honestly believe that you are okay, but that is anything but the case," says France.
While the employment law changes tend to exercise the minds and pockets of SME owners, another law change has largely slipped under the radar, with little media play, since it only kicked in on 3 December, 2007.
The NAP (No Asset Procedure) regime allows anyone without assets, owing up to a maximum of $40,000 to have their debts wiped out within 12 months – although it will stay on an individual’s credit rating for the existing seven years for bankrupts. Nearly 250 people, looking for what has been termed a "get out of jail free" pass in some quarters, had lodged applications by the end of January. The question is, are any of your customers on that list?
None of the legal experts talked to could foresee any relief on the Resource Management Act either – just endless tweaking and fiddling. And despite the views you might hold, climate change legislation and carbon trading are going to enter our commercial lives at least.
Milner-White believes that the total climate change issue should become part of ALL companies’ broader corporate social responsibility.
"Even for SMEs, it doesn’t matter what your views are on the subject, this legislation is here to stay and will get passed. So, accept it and make capital out of your ‘green’ status and strive to be carbon-neutral. If the large emitters and the big corporates are going to be caught up in this – and they will – they will be looking to their suppliers to conform too."
Kevin Kevany is an Auckland-based freelance writer.
Email [email protected]
Auckland District Law Society: www.adls.org.nz
www.kensingtonswan.com/salt (For compliance and training.)