New paradigm creates challenges for SME

OCT 2010

After a long period of attempting to out run tumultuous economic conditions, Gold Coast business owners are finally getting on top of their books. But with the world’s new corporate platform comes fresh compliance challenges and SMEs need to be cautious of a new legal paradigm.

Despite an overall awareness of new laws surrounding compliance, there’s still a worrying trend among Gold Coast small business owners following the advent of legal developments.

From due diligence procedures; protection of intellectual property (IP) and other business assets; compliance with employer obligations; and remaining lawful during general business proceedings, a raft of local companies are knee-deep in potential legal issues.

Cronin Litigation principal Derek Cronin, says local businesses remain wary of economic conditions and the subsequent legal implications that may arise.

“The biggest legal concerns among the Gold Coast business community focus on what they should be doing to protect themselves in this new corporate environment,” says Cronin.

“The general consensus is that we aren’t out of recession just yet and businesses need to be on-top of their legal housekeeping. Small business in particular should be far more proactive with their credit control and recovery of debt and need to act swiftly in dealing with any rogue players.”

Aikten Wilson Lawyers principal Brett Wilson warns not to overlook processes closer to home.

“It’s imperative that SMEs ensure their paperwork and documentation meet all legal requirements in this new business paradigm,” he says.

“An administrative error can have severe consequences from a legal perspective and in these conditions businesses cannot afford the domino effect that follows when one party doesn’t get paid or one deal falls through.

“It can be a very tough market out there but it can be much harder if you don’t cross your T’s and dot your I’s.”

Intellectual property

Edge Legal director Jamie White, says protecting business assets is more important than ever and it is often a company’s IP that is overlooked.

He suggests the intangible nature of IP means it is often misunderstood or undervalued.

“Identification and protection of intellectual property is crucial in that even inadvertent infringement is capable of financially crippling a business,” says White.

“This may be by virtue of a company being ordered to account for profits as a consequence of encroaching upon another party’s IP rights or it may be due to a requirement to implement a complete rebrand. Either way, the consequences can be dire.”

White says typical IP housekeeping involves a review of business structures, the performance of an IP audit and registration of any IP rights that a business may have.

“Attendance to all of these matters will ensure that any competitive advantage that a business may have will be sustainable. Failure to attend to these matters is placing the future of a business at risk,” he says.

Industrial relations

The Federal Government’s second phase IR restructure came into effect on July 1 and polarised the business community. Nationally, almost 4000 awards and industrial instruments were reduced to what the then Rudd Government called 122 ‘modern, simple awards’.

Government-commissioned research by Access Economics estimates that in a decade the new system will have saved the Australian economy $4.8 billion, but Gold Coast lawyers are witnessing the impact on small business owners first-hand.

Brett Wilson, a former Freehills and Minter Ellison workplace relations specialist, says many employers are ‘struggling to meet their commitments’.

“The biggest issue seems to be that the new legislation is just so complicated and a lot of our new and existing clients aren’t keeping up with all the processes,” he says.

“A lot of clients weren’t even aware that an industry award rate now applies to them. One of our interstate clients is up for $250,000 in unpaid wages just because they didn’t seek regular legal advice.

“It’s absolutely up to businesses to stay on top of these legal requirements and the Fair Work Ombudsman is being very aggressive in enforcing these laws. The last thing a small business owner needs is legal pressure from failure to comply with the Fair Work Act when they’re already struggling to get on top of their financial situations.”

According to Edge Legal director Rob Graham, common compliance oversights include failing to review employment agreements; being unaware that sole traders and partnerships now fall under federal as opposed to state legislation; and a general ignorance of the protection of workplace rights and the sham arrangement provisions.

“Gold Coast SMEs need to understand that failing to comply with the Act can be a costly learning experience,” says Graham.

“The penalties for non-compliance under the Act are quite significant, for example the penalty for failing to provide a Fair Work Information Statement to a new employee is $6000 for individuals and $33,000 for corporations.

“Given the severity of the penalties for non-compliance with the Act and the negative publicity that may stem from an adverse finding, it is prudent for SMEs to engage employment lawyers to periodically review their industrial relations and employment practices.”

Aside from the occasional random audit, Graham says the Fair Work Ombudsman generally only audits and inspects a workplace in the event of a complaint by an employee.

By the end of this year, 10,000 Queensland companies would have received a door knock from the Fair Work Ombudsman as part of a three-year nation-wide roll-out of 50,000 inspectors.

Cronin says there is some apprehension that the worst aspects of unfair dismissal laws could creep back into legislation, but really the primary concern is ensuring full compliance as employers.

“Business owners should continue to seek legal advice to ensure they are fully compliant, including providing the correct amount of leave and are up to date with any award rate increases,” says Cronin.

“While the Fair Work Ombudsman has been quite vigilant in its increased monitoring, many business owners are finding dealings to be more co-operative than adversarial as the two parties work towards compliance.

“Because of this approach, many businesspeople believe it’s a positive thing for the corporate landscape and are fully cooperating with any inspections and audits.”

Right advice paramount

The responsibility is on SMEs to ensure they get the right legal advice and meet their legal obligations. With the added availability of specialist consultants has created a ‘wealth of expertise that in years gone by could only have been accessed in the capital cities.

“Gold Coast-based businesses no longer have to go to Brisbane to get specialised legal services as the Gold Coast now has a broad spectrum of law practices, ranging from the smaller more boutique firms right through to the medium and top-tier firms,” he says.

Cronin attributes the expansion of his firm to the growing number of Gold Coast companies seeking specialised services locally.

“What I’ve noticed over the last five years is that as the Gold Coast business community has really matured so has the city’s legal sector,” he says.

“The industry has really broadened to the point where local firms can provide all the services that businesses traditionally had to find in Brisbane. There is an acknowledgement by local business that the Gold Coast can provide professional and high quality legal services on par with any capital city.”

But while specialist services are in demand, some firms have downsized to meet the new market, while others have moved to meet demand. Hynes Lawyers has relocated its property services to Brisbane, while Minter Ellison and Hickey Lawyers have streamlined operations.

Brett Wilson says the costs associated with large national firms are no longer justifiable by superior service.

“I always tell clients that when you go to a big firm in Brisbane and are amazed by the beautiful big office and city views – just remember you’re paying for those,” he says.

“People can’t afford to fork out $20,000 these days just so a big national firm can tell you you’ve got a lot of problems. On the Gold Coast, firms have lower overhead costs, fixed fees in most instances and most importantly, more specialised services are available here than ever before.”

A raft of legislative reforms by national and state legal bodies coupled with the slow return to economic certainty, means Gold Coast SMEs must stay on top of their numerous legal obligations, now more than ever.

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