Staying on the Right Side of the Law
To save yourself a lot of unnecessary and sometimes expensive hassle, you need to make sure that your business is legal. That means checking what licenses or permits you’ll need, understanding the laws that apply to your business, as well as making sure you’re compliant with health and safety regulations. Understanding business taxes and keeping business records are all part of being legal as well.
Licences and Permits
Some business activities require licences and / or permits. Typically, these must be in place before the business starts operating. What you’ll need depends on the kind of business you’re running. For example, if you’re going to be disposing of chemical waste, you’ll need a permit to do so. If your business is particularly noisy, you might not be able to operate in your chosen location and will need to look somewhere else.
Since regulations and compliance differ between industries, the licences and permits your business need will depend on the type of work you will be doing. The easiest way to find out what laws apply to you is to use the Ministry of Business, Innovation and Employment Compliance Matters tool.
Health and Safety
As a business owner, it is your duty to provide a workplace that is safe for all workers, visitors, and customers. The Health and Safety at Work Act 2015 (HSWA) is New Zealand’s main law which covers workplace health and safety.
Under the law, you must do what is ‘reasonably practicable’ to manage health and safety risks at work — this means doing what a reasonable person would do in your situation to create a healthy and safe workplace. In addition, your business must make sure all workers can contribute to health and safety decisions at work.
The WorkSafe website contains the information you need to ensure your business meets health and safety requirements.
The Consumer Guarantees Act
The Consumer Guarantees Act 1993 protects consumers (people buying products for personal use) against faulty products and ensures that the products they buy are fit for purpose. The act applies to anyone who is ‘in trade’ and applies to both products and services. As a business owner, you need to have an understanding of this law so you know what to do if a customer wants a refund or replacement.
Under the act, any products you sell must:
- Be yours to sell – that is, your business must have the right to sell the goods, so that the customer will then have the right to own the goods. For example, if you’re a car dealer, you can’t sell a car if the previous owner still has a loan for that car and is using the car as security for the loan.
- Be delivered within the time agreed – if you did not tell the customer when to expect their product, it must arrive within a ‘reasonable’ time. It must also arrive in good condition.
- Be of acceptable quality – products should be safe, durable, of a reasonable quality for the price paid, and look the way they’re supposed to. They should also be free of defects. An exception to this is if the customer is well aware of the condition of the product and choses to purchase it. For example, a business may clearly label a product as ‘damaged’, and sell it at a discounted price to reflect this.
- Be fit for purpose – your products must do what they are supposed to, and be able to be used for the purpose they were purchased. For example, if your customer wants to go mountain biking and you sell them a road bike, they’ve got a good reason to complain.
- Match the description – if a customer chooses to buy a product based on a picture or description they see on your website or on other advertising material, the one you supply them must match up. For instance, if you’re advertising a barbeque that has a spit-roast function, and you sell a customer one that doesn’t have one (and you haven’t mentioned this), your customer has grounds for a complaint.
- Match any sample shown – if a customer purchases a product based on a sample you’ve shown them, or perhaps a product you have on display in your store, you must supply them with a product that matches that sample. You cannot supply them a different, but similar model even if you think the model you are giving them is better!
- Be at a reasonable price, if the price is not already known to the customer – if a customer agrees to buy a product without knowing the price or how the price will be worked out, you must sell that product to them at a reasonable price.
- Have available parts and repairs – if the product you are selling can be repaired, you need to be able to provide spare parts and repair options for a reasonable period of time. Alternatively, you need to tell customers they are not available before they buy.
If you sell services, you must ensure:
- The service is carried out with reasonable care and skill
- The service will be fit for purpose – your service must be suitable for the purpose for which the customer is buying it. For example, if a customer asks an electrician to install a power outlet outside their house so they can put a spa pool outside, the power outlet must be suitable for a spa pool as opposed to normal household appliances.
- You complete the service within the time agreed – or if no time was agreed, it must be completed within a reasonable time.
- The price is reasonable, if the price is not already known to the customer.
In addition, problems are your responsibility – it’s up to you to deal with faulty goods you’ve sold or services you’ve provided. If the customer has asked you to sort it out, then it’s your responsibility to do so by fixing it, replacing it, or refunding it. However, the customer is responsible for is to report a faulty product as soon as possible. They can’t ask you to deal with it a year down the track.
It’s also important to be aware that if you’ve sold something faulty and it’s had consequences, you could be liable for any damages. So, if the faulty toaster you’ve sold causes a fire in the kitchen, you could be responsible for paying the costs of the damage caused by that fire.
Factor to Consider
If you offer a guarantee on a product, then you must abide by that guarantee. Even so, no guarantee you offer can ever replace a customer’s rights under the Consumer Guarantees Act – you cannot opt out of the act. Even if you have a sign up saying ‘no refunds or exchanges’, this does not override a customer’s rights.
Other Useful Acts to Be Aware Of
There are a number of other laws that cover common business activities. Just how much these apply to your business will depend on the industry you are in.
Resource Management Act 1991 (the RMA)
This is New Zealand’s main law covering environmental management. It covers where businesses can be based and what sort of business activities can be undertaken.
It is particularly important to be aware of the RMA if your business is likely to have an impact on the environment. For example, if your business uses chemicals, these need to be disposed of properly. In some cases, your business might even need to get a resource consent to operate where you want to operate, and to carry out certain activities.
Fair Trading Act 1986
The purpose of this act is to ensure you do not mislead customers. It prohibits, among other things, deceptive pricing, misleading statements about research conducted, and falsely promising to supply prizes for competitions.
This act also applies to recruiting staff. You cannot place a job advertisement that makes a job sound a lot better than it really is.
Food Act 2014
If you will be making or selling food there are strict rules you must abide by. You have to register your business with your local council or the Ministry for Primary Industries. You may also need to have a written food control plan.