The key to business survival on shaky ground

February 15 2017

The key to business survival on shaky ground

The Kaikoura earthquake late last year was a timely reminder for Hawke’s Bay businesses that we too operate on volatile and unpredictable land. The Kaikoura shake demonstrated that even when there isn’t widespread destruction or loss of life, earthquakes can have a major impact on businesses and property owners. Here are some tips to keep in mind if you own, or are a tenant in a commercial building affected by an earthquake.

Working with Civil Defence

Building owners have the primary responsibility for ensuring their building is structurally safe. If a state of emergency has been declared, you must provide assistance to local emergency management officials or to your council if there’s no state of emergency.

In a state of emergency, civil defence officials are likely to initiate a rapid assessment to determine if your building is structurally safe. You must co-operate fully with this inspection process and provide any information they request such as previous engineering advice or reports. News footage from Christchurch and Kaikoura has familiarised us with the issue of safety placards. Your building will receive one indicating whether it can be used, has restricted entry, or is deemed unsafe to enter.

Civil defence officials can also enforce structural assessments and make safe or demolish all or part of your building. They can also order evacuations, close roads and public spaces. This often occurs when there is a risk a building may collapse, and consequently, has a significant impact on neighbouring businesses.

Health and safety for owners and tenants

Any building used for business activities requires the owner and the tenant to fulfil various duties under the Health and Safety at Work Act 2015. Most importantly, you have a duty to consult, co-operate and co-ordinate with one another.

Other duties include appointing a person to manage workplace safety, including securing fixtures and fittings such as shelving, to minimise or mitigate risks to the health and safety of any person.

What happens after an earthquake?

If there’s any risk the structural integrity of your building has been affected by a quake, you should engage a chartered professional engineer to conduct an inspection.

If you already have a structural engineering report, you’ll have recommendations about whether another report is required, such as your building’s tolerance to a certain magnitude of earthquake. If not, you’ll need to use best judgement as to whether the building’s structural integrity has been compromised, potentially or otherwise.

The Ministry of Business, Innovation and Employment suggests you assess the following:

  • Broken windows
  • Broken or cracked concrete, plaster, masonry and wall linings
  • Damage to building components
  • Changes to building levels or tilting
  • Dangers from neighbouring buildings and environs, such as power lines
  • Dislodged services
  • Significant displacement of furniture and office components

If engineers confirm your building is structurally safe, you and your tenants will need to decide if it can be reoccupied. Also consider damage to services, water, sewerage and fire protection before deciding if the building is safe. As we know, fire caused more damage in the 1931 earthquake than the quake itself.

You should also repair or mitigate other hazards, such as dust, broken windows and dislodged furniture before resuming normal business operations.

Who pays for the damage?

Sorting out who pays for the damage will depend on what is damaged and the terms and conditions of the lease. Commonly, the landlord pays to repair the building, and tenants repair or replace fixtures and fittings.

Check the terms of your lease to clarify your responsibilities as there are exceptions. The Property Law Act 2007 specifies that landlords can’t make tenants pay for any damage to the building as a result of an earthquake, even if the tenant is obliged to pay for damages under their lease.

The people factor

Most significantly, earthquakes disrupt your employees ability to work, creating a burden of payroll expenses with no productivity while the business is closed.

The Employment Relations Act 2000 doesn’t specify your obligations after a natural disaster, but both employers and employees have a duty to act in good faith. Check your employment agreements and policies to see if you’ve addressed the situation. Employers should also check their insurance policy to see whether they are covered for payroll expenses if the business is closed.

Generally, if employees are willing and able to work, but the workplace is shut, then they need to be paid, even though it isn’t financially viable over the long term. Following the Kaikoura earthquake, the government offered a wage subsidy to affected businesses to encourage employers to keep staff on while the business was closed for repairs. While this helped to stabilise the situation, it’s not guaranteed, so employers and employees should talk with each other about how to best manage the situation.

Good faith, common sense and compassion goes a long way in stressful situations. Make sure you talk to us if you need any advice.

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