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LAWS THAT CAN BITE

by Stewart Germann,
last updated 29/05/2017

Franchises which serve or process food have to stay on top of hygiene and employment issues. Stewart Germann outlines some areas to think about

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If you don't stay on top of everything from food safety to taxes on tips, penalties can take a big bite out of your bottom line.

If you don't stay on top of everything from food safety to taxes on tips, penalties can take a big bite out of your bottom line.

In a busy café or restaurant, it’s sometimes easy to overlook details which can get franchisees and the brands they represent into big trouble. That’s why franchisors need to be aware of changing laws and provide guidance to their franchisees at all times. By staying ahead of the game, they protect the investment of all concerned.

Here are some areas that food franchisors and franchisees need to know about. Some of them are obvious, some of them less so – but all have the potential to have a big impact upon a franchised business.

Is it safe?

Food safety is important, and health grades can make or break a restaurant. In New Zealand, there are four statutes which govern the Ministry for Primary Industries’ food safety responsibilities. These are:
- Food Act 2014
- Animal Products Act 1999
- Agricultural Compounds and Veterinary Medicines Act 1997
- Wine Act 2003.

The most recently changed of these is the Food Act 2014 which came into force on 1 March 2016 and replaced the Food Act 1981. All food businesses, including restaurants and cafés with an alcohol licence, need to have registered under the new Food Act by 31 March 2017. Any business which has not registered is therefore in breach of the Act and commits an offence making it liable for infringement fees, with most offences incurring a fine from $300 to $450.

The new law doesn’t affect just traditional restaurants. As of this year, businesses such as early childhood education centres that serve food; processors of nuts, seeds or coffee beans; and manufacturers of food for vulnerable people like babies or the elderly also need to register.

Under the new rules, higher-risk businesses need to use a written plan for food safety. Under the Act, ‘safety means a condition in which food, in terms of its intended use, is unlikely to cause or lead to illness or injury to human life or public health.’

Councils are responsible for grading food premises: in greater Auckland, for example, the grading assessments are based on the Food Hygiene Regulations 1974, Auckland Council Food Safety Bylaw and Best Food Hygiene Practice. For each assessment, an Environmental Health Officer will inspect the standard, conduct and maintenance of the premises, process control, cleansing and sanitising, and staff training. Officers compare premises against a list of criteria and assign one of four grades – A, B, D and E. There is no C grade as all food premises are either above or below the average food safety standards. A equates to high, B good, D poor and E unsatisfactory. There is also a Pending grade meaning a new/recently transferred ownership. It is therefore essential for there to be high standards in food preparation and presentation, and for staff to be trained accordingly.

Discrimination is not OK

It is important to recognise that lesbian, gay, bisexual, transgender and intersex (LGBT) people have the same rights in New Zealand as other people. The Human Rights Act 1993 outlaws discrimination on the grounds of sexual orientation and, implicitly, gender identity/expression.

Some examples of discrimination still occur but significant progress has been made 

It is important to recognise that lesbian, gay, bisexual, transgender and intersex (LGBT) people have the same rights in New Zealand as other people. The Human Rights Act 1993 outlaws discrimination on the grounds of sexual orientation and, implicitly, gender identity/expression.

Some examples of discrimination still occur but significant progress has been made towards better protection of the rights of sexual and gender minorities. Human rights in relation to sexual orientation or gender identity include, for example, the right to freedom from discrimination; recognition as a person before the law; life, liberty and security of the person; freedom from arbitrary detention and to a fair trial; an adequate standard of living, including decent work and housing; education; health and protection from medical abuses; participation in public life and in cultural life; freedom of expression; freedom of association and peaceful assembly; and freedom of thought, conscience and religion.

Franchisors who employ staff and franchisees who need and employ many staff must be aware of the rights of LGBT people at all times. If their rights are infringed it could amount to sexual harassment. For trans-gender/trans-people it is solely their decision whether they wish to disclose that they are trans-gender, as sex or gender identity has no bearing on a person's ability to do the job. There are some very limited circumstances where it is legal to employ only a woman or a man for a particular position and in those situations, some trans‑gender people may need to provide evidence about their sex.

What are they on?

Most employment agreements in New Zealand allow an employer to randomly test employees by consent for illicit drug use. If you have employees engaged in food preparation and presentation or any other services, in my opinion it is important for all employees to be ‘clean’. There is a wide range of controlled and illegal drugs which the Misuse of Drugs Act 1975 classifies according to the level of risk or harm they pose to people misusing them. Those categories are:

Class A (very high risk): methamphetamine, magic mushrooms, cocaine, heroin, LSD (Acid)

Class B (high risk): cannabis oil, hashish, morphine, opium, ecstasy and many amphetamine-type substances

Class C (moderate risk): cannabis seed, cannabis plant, codeine.

It is an offence under the Misuse of Drugs Act 1975 to use, possess, cultivate or traffic (deal) in illegal drugs. Youth offenders under the age of 17 are not subject to the same penalties as adults (17 and over). There are definitions for use, possession and cultivation but probably the most serious offence is trafficking which includes the preparation of a drug of dependence for distribution; manufacturing an illegal drug; and selling, exchanging or agreeing to sell, offering for sale or having possession for sale, an illegal drug.

Usually if an employer detects drugs in the workplace the Police will be called as it is a criminal offence and normally the employer can summarily dismiss the employee. Employers are not legally required to offer support but some large companies (for example, Air New Zealand) choose to write it into their drug testing policy.

What have they done?

A job applicant does not have to offer information about any previous criminal convictions if they are not requested to. If an employer asks job applicants if they have any previous convictions, they should act in good faith and tell the truth, especially if it is likely that the particular convictions would influence the employer's decision about hiring them. If an employer discovers after an employee starts work that person has convictions which were not mentioned in the application form, can they dismiss the employee? The answer depends upon the application form and what questions were asked; it is a complex area and expert advice should be sought.

Employers can obtain a job applicant or employee’s relevant criminal history from the Ministry of Justice or the Police, but only if the person agrees in writing.

Convictions involving violence or dishonesty will almost always influence a hiring decision but employees do not have to disclose convictions that are covered by the Clean Slate Rules. Under the Criminal Records (Clean Slate) Act 2004, an applicant can confirm to an employer that they have no criminal record (criminal conviction history) if all of the following statements are true:

- no convictions within the last 7 years;

- never been sentenced to a custodial sentence (such as prison, corrective training or borstal);

- never been convicted of a sexual offence;

- fully paid any fine, compensation, reparation or costs ordered by the Court in a criminal case;

- never been banned from driving until further notice (indefinite disqualification);

- never been held in hospital by the Court in a criminal case instead of being sentenced, due to a person’s mental condition.

 The Ministry of Justice can provide a list of criminal and traffic convictions and sentencing from Court appearances but such criminal conviction histories do not include convictions that are covered under the Clean Slate Rules.

In all cases, an employer cannot use Police vetting as part of their short-listing process and they must: explain the Police vetting process to the prospective employee; obtain the person’s consent; keep their personal information confidential and secure; let the person see the information received from the Police; provide an opportunity for the person to correct information or provide an explanation; and securely destroy information provided by the Police when the purpose of the vetting check has been completed for the employment process or any internal/external audit.

In New Zealand, waiting staff in cafés and restaurants get paid a higher hourly rate than in many overseas countries. It is therefore generally uncommon for locals to tip except for very exceptional service. If a person does want to tip then the amount is at the discretion of the tipper and would generally be in the range of 10 percent according to the value of the meal/services.

The IRD has advised the Restaurant Association of New Zealand that tips given directly to an employee, or placed in a tip jar and divided up between relevant employees, will constitute taxable income to those employees. It is the responsibility of the employees to return any tips as income by completing an income tax return at the end of the financial year (whether that happens in practice is doubtful, in my opinion). Tips can be added to a bill electronically (via eftpos) and these should be shared with employees. If tips are not distributed to the employees, then the tips become taxable income and the business is liable for GST on those amounts. 

If an amount is an involuntary addition to a bill (such as a public holiday surcharge, when staff wages are higher by law) then it is a cost for goods and services provided and constitutes income to the business which must account for GST.

The law is the law

Because franchisors and franchisees operate under a common brand name, it’s important that everyone be aware of the laws governing how they operate. Bad publicity for one is bad publicity for all.

The above areas are easily overlooked, especially in the food sector which can have high staff turnover rates and where franchisees may originally come from other countries where different standards apply. However, ignorance of the law is no excuse for business owners of any kind, so franchisors need to ensure their franchisees are not just aware of these laws but comply with them every day.

 

This article originally appeared in Franchise New Zealand magazine Year 26 Issue 01 - download here to read it on your device or send for a free print copy to be posted to you at any New Zealand address.

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