Significant changes in New Zealand’s Employment Law
The Employment Relations Amendment Bill (Bill) has now received Royal Assent and has come into force on 21 February 2026.
The Bill introduces substantial changes to the Employment Relations Act 2000 (Act) and will aim to increase labour market flexibility and business confidence. We touch on the key changes for your business to be aware of below:
A new “Gateway test”
The Bill introduces a new category into s 6 of the Act, which excludes anyone who qualifies as a “Specified Contractor” from claiming employment status.
A person will be a ‘Specified Contractor’ if:
- There is a written agreement specifying that the person is an independent contractor, or is not an employee;
- The person is not restricted from working for others, except if they are working for the principal at the time;
- Either the person is not required to work at a specific time or minimum period, or, the person is allowed to subcontract the work. The principal may require the sub-contractor to undergo a criminal record check if justified by the nature of the work;
- The agreement can’t be terminated because the contractor declines to perform additional work offered by the principal;
- The contractor is given reasonable opportunity to seek independent advice.
If a worker does not satisfy one of the above conditions, the worker will retain the ability to challenge their status through the “real nature of the relationship” test.
The new test applies immediately and covers existing arrangements, but it does not apply retrospectively. Businesses should be aware that while an existing contractor may satisfy the new gateway test, the Authority could still determine the person has been employee before the commencement of the Act if the “real nature of the relationship” pointed toward the worker being an employee at that time.
We recommend that businesses relying on contracting models review all agreements to ensure compliance and consider whether variations are required.
Remuneration threshold limit to personal grievance claims
Employees who earn more than $200,000 per year or more will no longer be able to raise a personal grievance for unjustified dismissal. This income threshold will update annually from 1 July 2027. Employees will also be prevented from raising a disadvantage grievance where the alleged unjustifiable action relates to the dismissal.
This change will apply immediately for new employees.
Businesses will have a 12-month transition period for existing employees whose income meets or exceeds the threshold. During this period, parties may negotiate and agree in writing whether to opt in and retain the PG provisions, or agree to other contractual terms.
Businesses should ensure their agreements are updated and that all contractual and policy obligations are clear. For instance, an employee above the remuneration threshold may request a longer contractual notice period.
Changes to remedies
The Bill also introduces some employer-friendly amendments to the remedies available for personal grievances. These include:
- If the Authority considers an employee’s conduct “contributed” to the situation that gave rise to the personal grievance, the employee will not be entitled to reinstatement or compensation (lost wages may still be available).
- Where the employee’s conduct amounts to serious misconduct and has contributed to the circumstances of the personal grievance, the Authority must not award any remedies (either reinstatement, compensation or reimbursement of lost wages).
- Remedies are now able to be reduced by up to 100% where the employee’s behaviour has contributed to the situation.
- For procedural defects to render a dismissal or an action unjustified, they must result in the employee being treated unfairly, and the employer must no longer show that the defects were “minor”.
These changes may lead employers to truncate disciplinary processes when serious misconduct or contributory conduct is clear. Although employers may view this as reducing procedural requirements, there is no legislative definition of serious misconduct. Litigation may focus on whether serious misconduct has occurred.
Employers should review agreements and disciplinary policies to reflect the new provisions and it will assist to have a good definition of serious misconduct in agreements and policies.
Removal of 30-day rule
The Bill removes the requirement under s 62(5) which required employers to employ new non-union employees on the terms of an existing collective agreement for the first 30-days. Subject to any contractual term requiring new employees to be employed on the terms of a collective, employers will be free to negotiate individual terms that differ from an existing collective, including a ninety‑day trial period.
Employers must still inform new employees that a collective agreement exists and provide the contact union contact details.
Trial Period provision amendments
The Bill also widens the scope of dismissals under a valid trial period. The new section 67B(2) prevents employees dismissed under a valid trial period from bringing a personal grievance where the claim relates to the dismissal.
Although trial periods are likely to continue being strictly interpreted by the courts, this amendment strengthens employer protection where a valid trial period applies.
These reforms represent significant changes to employment law and particularly the personal grievance regime in New Zealand. Overall, they are likely to provide some relief to employers in a currently relatively employee friendly system.
It will be important for employers to review and update their current agreements and policies to reflect these changes.
If you or your business requires help in understanding how these changes affect you, our team of specialist employment lawyers are here to help.
Special thanks to Partner Mark Lawlor, Partner Alastair Espie, Associate Hagen Neumegen and Solicitor Bridget Craig for preparing this article.
Contact our employment law team for tailored advice for your situation.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
