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Jewellers need to be aware of a few key legal reforms this year

Legal reforms that jewellers need to know

2.8 k views | Posted July 01, 2011 | By Lorna Goodyer

Fines and penalties over legal wrangles are the last thing that jewellery business owners need, so knowing and understanding the letter of the law is crucial. Lorna Goodyer finds out which recent or upcoming reforms affect the industry and why jewellers need to pay attention.

$50,000 is a lot of money for any small business. In the retail jewellery industry, that cash could be put to good use on inventory, staff, overseas buying trips, new store technology… The possibilities are endless. But what if that money had to be allocated to clear a fine that could have been avoidable if only you’d done your homework? What if that fine deprives your business of some much-needed cash flow?

And $50,000 is no exaggeration. The cost of non-compliance on some of the Government’s new retail and HR rulings isn’t just small change. The question is: do you and your staff know where you stand? Here, Jeweller outlines the essential legal reforms affecting the jewellery industry.

Personal Property Securities Act (PPS)
This bill was meant to come into effect on May 1 but has been put back to October. “The main impact on the jewellery industry is that it replaces existing Retention of Title (ROT) rules on goods supplied,” says Jewellers Association of Australian (JAA) chief executive Ian Hadassin.

This is most applicable to jewellery suppliers, as it covers protection on unpaid stock that is sent to stores on consignment. “Almost all suppliers have ROT clauses in their credit agreements and on their invoices. This is so that they retain the title on (and therefore can take back if needed) goods that have not been paid for,” explains Nationwide managing director Colin Pocklington, who has eight years’ experience working with the New Zealand PPS system on which Australia’s system is partly modelled.

However, when the new PPS act comes into force these old clauses will no longer be binding – the only way for suppliers to ensure their stock is protected will be to use the national PPS online registration system.

And the new register is expected to be far more complicated than the old system. Hadassin says, “Before, as long as you had a Romalpa clause in your conditions of sale, worded in a particular way, on the back of your invoice you were covered. The new PPS law is extremely complicated and most jewellers won’t understand it.”

Luckily, retailers should have little or no direct involvement with the register. The Government says that the new PPS act should actually benefit small businesses by increasing the availability of finance for them. “The current arrangements for determining whether personal property is subject to a security interest restrict the ability of individuals and businesses to use their personal property as security for credit,” it explains. However, on the flip side this means retailers will now have to deduct any goods they haven’t paid for from their stock-holding, which could decrease their asset value.

The JAA intends to hold a PPS seminar at the upcoming International Jewellery Fair in Sydney. For more information on PPS, visit its official website.

Annual leave loading
If the Modern Awards weren’t confusing enough, this new approach to the Awards’ implementation being endorsed by the Fair Work Ombudsman is enough to make your head spin. Adrienne Unkovich, managing director at HR consultancy the Workforce Guardian, says the new requirements on annual leave loading could be “a big shock for some jewellery store owners”.

Leave loading tends to add 17.5 per cent to any holiday pay (depending on the Award), and the new approach requires annual leave loading on accrued annual leave balances to now be paid out when employment ends – even if the Modern Award specifies that the employer is not required to do so. To make matters more complicated, the new requirement will be retrospective to January 1, 2010. This means jewellery retailers could face backdated annual leave loading claims from staff that left up to 18 months ago.

Unkovich warns, “If you have not paid [ex-employees] leave loading on accrued holiday pay, you are now exposed to back-pay claims from ex-employees who want to recover the unpaid annual leave loading.”

Component pricing
Retailers are now required to include GST in any consumer pricing following this amendment to the Trade Practices Act, which came into force more than two years ago. However, Hadassin says he is still seeing some online retailers flouting the law – albeit possibly without realising. “They think just by stating underneath [the price] that ‘this does not include GST’ it covers them. It doesn’t. They can be prosecuted if the price isn’t all-inclusive,” Hadassin warns.

However, another issue – and one that the JAA is lobbying the Government over – is that the new provision fails to make clear the rules when it comes to trading between businesses. “The ACCC is saying that any business-to-business trading is not applicable to the law. But that’s not how the law reads. I don’t see the ACCC prosecuting a business if some of [a jewellery supplier’s] customers are not Pty Ltd, but our members should know they may still be in breach of the law.”

Hadassin hopes that the JAA can persuade the Government to revise the act so that there is absolutely no risk of prosecution. Paid Parental scheme administration.

The Government-funded Paid Parental Leave scheme was brought in at the start of the year, but it’s only as of July 1 that all businesses will be responsible for administering the scheme themselves. If your business hasn’t yet registered with the Family Assistance Office, do so now. Unkovich says, “You need to ensure your payroll system can record Paid Parental Leave payments and that you implement appropriate HR policies to document and communicate your obligations to your employees.”

Second-hand Goods Bill 2011
This draft bill proposes a system where all businesses buying directly from the public must register for a second-hand dealers’ licence, the objective being to reduce the opportunity for thieves to dispose of stolen goods such as jewellery.

At the moment this legislation is for South Australia only but Hadassin says most, if not all, states already have similar legislation or intend to take the same approach to the law.

Registering as a second-hand dealer will bring a whole heap of responsibilities: retailers will be required to buy a software programme that lists all that they buy and will then have to hold the items for two weeks while the police check whether the goods have been stolen. Luckily, Hadassin says most jewellers won’t be affected; those acquiring second-hand jewellery through trade-ins will be excluded from the provision.

Competition and Consumer Act
This far-reaching bill – which includes the new Australian Consumer Law – replaced the Trade Practices Act at the start of this year, and with it came several changes that affect both retail jewellers and suppliers.

Perhaps the most important shake-up concerns guarantees and warranties. When it comes to guarantees, retailers have seemingly gained a greater degree of flexibility under the new law, as they can now choose whether to repair, replace, re-supply or refund consumers if the failure is minor and can be remedied within a reasonable time.

However, when Jeweller originally reported on this new ruling back in December 2010, the ACCC was quick to point out that this does not give retailers free rein: the consumer still has legal rights if there is a major problem with the jewellery or if the jewellery cannot be repaired within a reasonable time (no matter how small the fault), and is entitled to ask for a refund in such circumstances. Even with this caveat, Hadassin believes the ruling is “a big step forward”, because it increases the retailer’s right to choose the remedy.

In terms of warranty documentation, the law has become tighter. According to commercial law expert Simon Jay, partner at Riordans Lawyers, the new statutory requirements for warranties against defects include:

• The warranty has to be in plain language and must set out precisely who is giving it

• The document must clearly state what the business giving the warranty is promising to do if the goods or services are defective and what the consumer must do in order to claim (and the time frame they must do it in).

There is also specific wording that retailers and suppliers now need to ensure is included in their warranties, and Jay says that the industry needs to be aware that the new warranty laws are not limited to formal written warranties either – they also cover informal as well as verbal agreements.

Businesses have been given a year to make the necessary changes to their warranty content before the new law comes into effect on January 1, 2012. Jay warns, “Given that this is a completely new law, your present warranty against defects will almost certainly not comply. The time for businesses to review their warranties – whether contained in a standalone document or in their general terms of trade – is now.”

The penalties for breaching the law on warranties will be steep, with fines of up to $50,000 for companies and up to $10,000 for individuals, and businesses can also be sued for damages and face other legal action.

Penalties can be stiff in other areas too – failure to comply with new legislation on customer testimonials, for example, can incur fines of up to $1.1 million for businesses and $220,000 for individuals. For more on this and changes to lay-by laws which affect retailers, see: http://bit.ly/lay-bys-and-testimonials.

For more information on Australian Consumer Law, visit its official website.

More reading:
New warranty law could trip up jewellers
Do jewellers really understand the Fair Work Act?
Jewellers urged to note consumer laws shake-up