The Employer’s Guide to the Employment Relations Act changes

On 21 February 2026, the Employment Relations Amendment Act came into force, significantly changing New Zealand employment law, with its promoted aims including increased labour market flexibility and improving business confidence. 

The law changes changes include:

• The introduction of a new ‘Gateway test’ to assist in determining worker status as employee or contractor.
• The introduction of a remuneration threshold removing the right to raise unjustified dismissal claims for high income earners.
• Significant changes (reductions) in remedies available to employees where employee fault is at issue.
• Strengthening of trial periods.
• Removing the '30 day rule' for collective employment agreements.

A new Gateway test to determine employee – contractor status

The Act has introduced a new ‘gateway test’ to determine whether a worker is a “specified contractor”. If statutory criteria are met, the worker cannot be considered an employee and will fall outside employment law rights and protections. 

What is a specified contract?

A worker will be a specified contractor when all of the following criteria are met:

• There is a written agreement specifying that the worker is an independent contractor, or is not an employee;
• The worker is not restricted from working for others, except if they are working for the principal at the time;
• Either the worker is not required to work at a specific time or minimum period, or, the worker 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 worker declines to perform additional work offered by the principal;
• The worker is given reasonable opportunity to seek independent advice.

If a worker’s arrangements cannot satisfy the above conditions, the worker will be able to challenge their status through the existing test of the ‘real nature of the relationship’, set out in section 6 of the Employment Relations Act.

This law has immediate effect. It covers existing arrangements, but does not apply retrospectively. 

In practice this means that where the statutory criteria can be met, and employers have well documented arrangements, there may be greater certainty for businesses that engage contractors.

Guide for employers:

• We recommend all businesses review their contractual arrangements to ensure compliance with the specified contractor provisions (where these apply) and seek advice on any variations necessary in light of the new Gateway test.

High income earner - 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 or an unjustified disadvantage claim where the action relates to the dismissal.

For new employees from 21 February 2026, the change applies immediately.

For existing employees, there is a 12-month transition period. During this period, parties may negotiate and agree in writing whether to opt in and retain personal grievance provisions, or agree to other contractual terms.

The income threshold will update annually from 1 July 2027. 

Guide for employers and high income earners:

We recommend that employers:

• Review which employees may be affected by the high income threshold and put in place systems to monitor those near or within the threshold.
• Review employment agreements and policies. Where necessary, documentation should be revised to be clear and unambiguous.
• Ensure good faith obligations to consult are met.
• Consider whether to apply the new high income threshold, and if so, whether this is will apply to the entire organisation, or, on an individual basis.
• If opting into retaining personal grievance provisions for high income earners, consider and negotiate any necessary alternative terms.

Guide for high income employees:

• Review your remuneration and whether you may be caught by the threshold.
• Seek independent advice – there are nuances to how the threshold is calculated, and, what to consider regarding negotiated terms. You should be aware of these when making decisions about whether to negotiate alternative terms, or, opt into retaining rights to the personal grievance regime.

Changes to remedies for personal grievances

One of the most significant changes is consideration of employee conduct and its impact on remedies following an unjustified dismissal. Previously, there was discretion for the Employment Relations Authority to reduce remedies where an employee’s conduct contributed to the situation. However, in practice, a reduction in awards was often relatively modest.

The Act has amended remedies available for personal grievances. The Bill also introduces some employer-friendly amendments to the remedies available for personal grievances. These include: 

• Where the employee’s conduct amounts to serious misconduct and has contributed to the circumstances of the personal grievance, the employee cannot obtain an award of remedies of reinstatement, compensation or reimbursement of lost wages.
• If 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, and 
• While compensation for lost wages may be available, remedies may be reduced by up to 100%. 
• A dismissal will not be unjustified solely due to procedural defects provided the employee was not treated fairly overall. This reduces the risk of claims based solely on technical flaws. 

Guide for employers:

• Consider disciplinary processes in employment agreements and policies and whether to amend/simplify these in relation to serious misconduct and/or contributory conduct. 
• Review or introduce a definition of serious misconduct, noting this is a high threshold to meet in reality.
• Amend standard disciplinary processes to expressly document and consider employee contribution to a situation.

Where any personal grievance is raised, employers will be in a stronger position to defend a claim where employee conduct is clearly at issue. However, this is not a ‘free pass’; employers are still obligated to investigate fairly and reasonably, and to act in good faith.

From a practical perspective, best practice will continue to be that employers undertake a fair and reasonable process in all the circumstances. However, where there is a minor error in process that does not have a real impact on the employee, or, the employee has obstructed an employer’s process so that they could not fulfil a full and fair process, an employer will be well paced to proceed with an investigation and decisions that follow, as well as defend their actions.

Trial periods strengthened

The Act clarifies that employees subject to a trial period clause will not be able to bring a personal grievance for unjustified actions causing disadvantage arising from their dismissal under the trial period clause. 

This aligns with the new rules for high-income employees.

Removal of 30-day rule for Collective Employment Agreements

The Act provides that where a collective employment agreement is in place, there is no longer an obligation under section 62(5) that employers employ new non-union employees on the terms of the 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.

This provides greater flexibility at the start of employment, with the ability to discuss individual terms from the outset. For example, the introduction of a trial period which does not feature in many collective agreements. However, should individual terms not be favourable, this may result in the employee considering the collective has more appropriate terms for them, and seeking union membership and collective terms.

Practically, employers and employees are wise to seek advice about any terms prior to presenting and signing employment agreements.

Guide for employers (where there is a collective employment agreement in place):

• Employers should check existing collective employment agreements to determine whether the 30 day rule is a contractual term. If so, this must be followed.
•  Employers must still inform new employees of the existence of a collective agreement and provide the relevant contact union contact details.

Further assistance from our specialist employment law team

For further information about the new changes in employment law, the specialist employment law team at DTI Lawyers can assist. You can contact us by email at [email protected] or phone 07 2820174.