Employment law changes are coming

Employment Law Changes are Coming

Since National took office in 2023 there has been a steady stream of employment law changes.  Trial periods were reintroduced for all employers, the Equal Pay Act was amended, the Fair Pay Agreements Act was repealed, and wage theft was criminalised.  There are now also tighter expectations relating to the retaining and storing of employment agreements.

A new personal grievance ground has also been added to the mix enabling employees to challenge adverse conduct connected to remuneration disclosure – i.e., if an employee is disadvantaged or dismissed because they have disclosed or discussed pay information with other parties, they may now have the ability to raise a specific claim in respect of that.

Further reform lies ahead with substantive amendments to employment relations currently before Parliament in the form of the Employment Relations Amendment Bill (the Bill), alongside the Government’s stated intention to reform the Holidays Act 2003.  As currently signalled, the changes would enhance employer flexibility and provide some much-needed simplicity and clarity to holidays and leave.

While the indicated changes to the Holidays Act 2003 warrant its own discussion, this article focuses on the changes to employment relations which will be in place if the Bill is enacted in its current form.  Collectively, the changes put forward by the Bill touch on a range of employment law issues that we deal with regularly.

On 8 December 2025 the Government received a select committee report (from the Education and Workforce Committee) and has been persuaded by some of the proposals made to further refine the Bill.  Below we set out a summary of the key changes and what they would mean, with reference to the key refinements.

Of course, the content of this Bill remains subject to further amendment.  The summary below is based on the most up-to-date information available at the time of publication.

Summary of key changes and what they would mean

The approach to setting remedies for personal grievances would be updated to place increased weight on employee conduct and contribution.

Employers may have stronger grounds to argue for reduced remedies where an employee’s own behaviour contributed to the personal grievance or amounted to misconduct.  In particular:

• If an employee’s behaviour amounts to serious misconduct they would no longer be eligible for any remedies.

• If an employee contributed to the situation giving rise to the personal grievance, they would no longer be eligible for reinstatement to the role or an award of compensation.

• The Employment Relations Authority and Court would be required to consider whether the employee’s behaviour hindered the employer’s ability to meet their obligation as a fair and reasonable employer.

• Employers would have greater protection where only minor or technical errors occur in processes with employees, provided on the whole the process is fair and reasonable.

• The Authority and Court would retain, and the Bill would reinforce, the ability to decrease an employee’s remedies up to 100 per cent.  This means employers could see no monetary remedies awarded in cases where an employee’s conduct played a significant role in the outcome.

An independent contractor gateway test would be introduced to simplify the question of whether a worker is an employee or contractor.

This change would give employers greater certainty when engaging contractors. If a written agreement and working arrangements meet all the specified criteria of the new test, then a worker would automatically be treated as an independent contractor.  Only where one or more criteria are not met would the Authority or Court step in to assess the “real nature of the relationship”, as is currently done.

Refinements have been made to the test to clarify the following:

• Business' that do not expressly categorise workers as independent contractors can still access the gateway test if they specify that the worker is ‘not an employee’;

• Businesses would be allowed to vet sub-contractors for certain qualifications or require a criminal record check of a sub-contractor if the nature of the work justifies it; and

• Contracting someone to work full-time hours would not in itself pose a restriction on working for others.

Higher income employees will not be able to raise a personal grievance for unjustified dismissal.

A high-income threshold (to be set at $180,000 or $200,000) would apply immediately to new employment agreements or after 12 months for existing employment agreements.  An employee affected by the high-income threshold would not be able to raise a personal grievance for unjustified dismissal claims.  It may rule out other personal grievances as well, relating to the dismissal, but the extent to which it will is an area that will inevitably be tested once the law is passed.

Refinements have been made to expand the definition of “income” to cover all remuneration, including bonuses and share schemes.  There is also a preference to calculate income based on the pay period immediately before an employee is notified of termination.

The 30-day rule regarding collective agreements would be removed.

This would allow employers and new employees to negotiate individual terms and conditions from the outset, rather than requiring individual employment agreements to mirror the terms of an existing collective agreement for the first 30 days of employment.

Summary

No doubt the reforms will spark debate from employees and unions, and there is uncertainty around how the amendments would play out in practice.  What is clear, however, is that the proposed changes reflect an intentional shift in the balance of employment relations.

With the Bill before Parliament and further reform to the Holidays Act on the horizon, 2026 is shaping up to be yet another significant year for employment relations in New Zealand.  Our specialist employment team is available to assist and keep you updated at each step.