The Employment Relations Amendment Act

1. New 5 factor test can exclude contractors from claiming employment status

The amendment introduces a 5 factor test to determine if someone is a contractor. If all five parts of the test are met, the worker is considered a ‘specified contractor’ and is therefore excluded from claiming employment status or employees rights.

The elements of the test are:

1. There is a written agreement for the working arrangement that specifies that the worker is an independent contractor, or that they are not an employee;
2. The worker is not restricted from doing work for any other person (except while performing work);
3. Either:
   1. The worker is not required to perform work (or be available to perform work) on a specific day, at a specified time or within a minimum period; or
   2. The worker may subcontract the work to another person subject to any vetting under the Act.
4. The arrangement isn’t terminated as a result of the worker declining additional work; and
5. The worker had a reasonable opportunity to seek independent advice before entering the arrangement.

This has been labelled ‘the Gateway Test’ because if all five elements are not met, the old test (where the courts determine the real nature of the relationship by assessing the factors of intention, control, integration and economic reality) will still apply.  

Employers can take advantage of the Gateway Test to solidify the status of contractors and avoid claims challenging that status. It is a good opportunity to review the working arrangements and documentation for contractors and consider whether there are changes needed to align with the Gateway Test.

2. New ‘remuneration threshold’ allows employers to prevent employees earning $200,000+ from raising dismissal-related claims

High earning employees can be prevented from raising a personal grievance for unjustified dismissal and/or an unjustified disadvantage for grounds related to the dismissal if their total remuneration prior to the dismissal meets or exceeds the specified remuneration threshold (currently $200,000).

If an employee has not worked for a year, the calculation can be adjusted for the days they have worked.

If applicable, this affords employers the freedom to terminate employment without complying with the usual good faith obligations or onerous processes.  However, employees would still be entitled to raise other claims such as a breach of contract claim or other unjustified disadvantages.

For some current employees, these provisions will not apply for 12 months unless the employer and employee agree in writing. The employee and employer may also ‘opt out’ of these provisions to preserve the employee’s right to raise an unjustified dismissal grievance.

We encourage employers to consider whether:

• You want to negotiate an earlier start to this provision for current high-earning employees.
• The inclusion or non-inclusion of this right will be a negotiation for new employees or promoted employees.
• If it will be a point of negotiation, whether you will offer anything by way of a termination package if you do rely on this provision.
• Whether there is strategic advantage in offering higher salaries or different remuneration packages to employees who would otherwise boarder the threshold.

3. Courts may reduce remedies by up to 100% if employee serious misconduct contributed to the situation

Employees who pursue claims may not be entitled to remedies if their own behaviour contributed to the situation that gave rise to the personal grievance and their conduct amounted to serious misconduct.

The right to reduce remedies has always been a feature of the law. However, the courts have been reluctant to reduce remedies by much, if at all. In the past, we have seen reductions limited to around 15%. This means that employees who have clearly committed serious misconduct (e.g. stealing from the employees) have still been awarded remedies due to process faults by the employer. This amendment is intended to address that.

We expect that the courts will more carefully scrutinise whether behaviour referred to by employers is actually serious misconduct and whether that behaviour contributed to the situation. It will likely be more difficult to treat borderline behaviours as serious misconduct.

We encourage employers to think about specific behaviours that might amount to serious misconduct in the business or industry and make it clear in employment documentation that those behaviours will be treated as serious misconduct.

4. No more 30 day rule – employees can choose whether to start their employment on collective or individual terms

Employers are no longer required to start new non-union employees on collective terms for the first 30 days of their employment.

This reduces onboarding obligations and opens opportunities to utilise trial periods that previously could not apply.

Employers are still obligated to inform new employees that there is a collective agreement and provide contact details for the union.

We encourage employers to check collective agreements for any contractual requirements in relation to onboarding (as these continue to apply). Update onboarding processes and associated documentation.