The Government has introduced a comprehensive Employment Relations Amendment Bill to Parliament aiming to boost employer flexibility and productivity. This Bill seeks to cut red tape and balance responsibilities between employers and employees.
This Bill intends to foster productivity and if the intention of the Bill is achieved it will reset the balance between employee and employer responsibilities and accountability for individual actions.
The Bill has been referred to select committee for report back by 17 November 2025.
We anticipate significant submissions on this Bill, as it involves major changes that reduce certain established employee rights.
It is the most substantial change to employment law and individual rights since the Employment Contracts Act 1991.
Both employers and employees need to be aware of the proposed changes and if passed, what these changes could mean for each of them.
We’ve outlined what you need to know, and some changes to motivations and behaviours we might expect to see as a result if the bill passes as presented below.
New test for independant contractors
Under the Employment Relations Act 2000 currently, individuals who are working as independent contractors can apply to the ERA or the Court to claim that the real nature of the relationship is that of employment. If successful, this opens the door to claims for personal grievances, rights to holiday pay and minimum entitlements. Given the retrospective enquiry associated with independent contractor claims – engaging contractors under the current framework can be fraught with peril.
In response to this uncertainty, the Bill proposes an amendment introducing criteria to exempt certain contracting arrangements from retrospective revision.
The Bill proposes to amend the definition of “employee” in section 6 of the Act to add an exclusion for someone who is a “specified contractor”.
Under the Bill, a “specified contractor” would be defined as someone who enters into an arrangement to perform work for another party, if certain criteria are met, as follows:
There must be a written agreement stating the person is an independent contractor.
The terms of the arrangement must include that the contractor is free to work for other parties, except while actively working for the principal.
The contractor is not required to work at specific times or for a minimum period. As an alternative, they may subcontract the work to someone else.
The agreement will not terminate if the contractor declines additional work beyond what was originally agreed.
The contractor had a reasonable opportunity to seek independent advice before entering into the arrangement.
Our take on the proposed changes
While this proposed amendment may help reduce uncertainty and risk when entering into independent contractor agreements, it will be essential to meet all the specified criteria. In some cases, the criteria as currently drafted in the Bill may be difficult to make work in practice. For example, allowing contractors to be free to work for others appears to make sense as it is generally true that contractors have more than one client. But, there could be important reasons why an individual may be limited from working for specific parties – including conflicts of interests or for health and safety reasons. It is not clear if this would be permissible under the proposed criteria.
Individual contractors may still be able to claim employment status for arrangements that fall outside the scope of this excluded category. Therefore, it is likely that claims will be brought forward, testing the boundary of what falls within the definition of “specified contractor”.
Access to personal grievance remedies in cases of serious misconduct
Under the Bill, an employee would not be entitled to remedies for a personal grievance if it is found that he or she has engaged in serious misconduct which has contributed to their grievance.
This measure aims to address concerns regarding situations where an employee may raise a grievance and challenge the employer's process.
Under this proposed change, the definition of serious misconduct and the boundaries of what is and isn’t serious misconduct will become key considerations.
It seems likely that employers will still need to follow due process that will demonstrate support for their finding of serious misconduct.
Contributing behaviour can change the outcome
For other types of scenarios (e.g. dismissal for poor performance), the employee’s contribution can be taken into account in limiting what remedies are available.
The Bill provides that the Authority or the Court must not provide for reinstatement or compensation if the employee’s conduct has contributed to the situation giving rise to the grievance.
Accordingly, in cases of dismissal that are not associated with serious misconduct, if contributory behaviour is identified, the sole financial remedy available for a personal grievance will be limited to reimbursement of lost earnings.
In addition, the Authority or the Court may reduce an employee’s remedies by up to 100% if the employee’s behaviour contributed to the situation that led to the personal grievance.
These changes are designed to enhance the focus on, and accountability for, employee behaviour within the personal grievance process. These amendments, if passed, are likely to substantially reduce the avenues for remedy and redress for employees claiming unjustified dismissal for fault based termination.
Test of justification
The Bill proposes significant changes to the test of justification for the Authority or the Court for personal grievances.
Under the Bill, a dismissal or employer action cannot be found unjustified solely because of procedural defects, provided those defects did not result in the employee being treated unfairly.
This change reinforces the principle that substance should take precedence over minor procedural errors.
In considering the test of justification, the Authority or the Court can take into account whether the employee obstructed the employer in managing its employment process or investigation.
In our experience, obstruction may occur when an employee uses delay tactics to avoid participating in a process without valid reason. Employers often find this frustrating, especially when seeking to understand an employee's perspective but do not receive cooperation in good faith. Employers will receive recognition for the challenges this behaviour brings.
Income threshold for personal grievance
The Bill proposes amendments to the Act that would remove access to remedies for higher-income employees by introducing a wage and salary threshold above which personal grievances relating to their dismissal cannot be pursued.
This threshold is $180,000, or a higher amount if adjusted. Updated thresholds will take effect from 1 July each year.
However, they may still bring other grievances, e.g. a claim to unjustified disadvantage or discrimination if that relates to other events in their employment.
The Bill proposes that for those employees to whom this income cap applies, to remove the employer’s obligation to provide information about a proposal that may impact on their ongoing employment under 4(1A)(c) which are the good faith provisions. In addition, the employer will not be required to provide a statement setting out the reasons for the termination under section 120.
The parties could agree to contract out of the above provisions, thereby preserving rights on termination.
To enable terms to be renegotiated, there will be a 12-month transition period before these changes take effect.
Changes to the playing field
We would expect that these changes will motivate employees to negotiate leaving provisions at the outset to ensure that they have a financial buffer e.g. they might negotiate redundancy compensation or more lengthy notice provisions.
For higher earning employees, there may be a greater degree of bargaining power due to the skill, expertise, or experience that the individuals bring to the intended role. Protections for these individuals might be achieved through negotiation rather than dispute provisions being engaged at the end of the relationship.
Repeal of 30-day rule: Automatic collective agreement coverage for new employees removed
The Bill will repeal the requirement for new employees to be employed on the terms of a collective agreement for their first 30 days – often referred to as the ‘30-day rule’.
In addition, employers will have simplified obligations with regards to notifying new employees of the union and collective agreement.
This will allow employers greater freedom to negotiate different terms for those employees on individual employment agreements from the outset.
Resetting the balance
If passed, the amendments will come into effect the day after receiving Royal Assent. The Minister for Workplace Relations and Safety, Brooke van Velden, has consistently expressed an intention for the reforms to be enacted later this year. However significant debate is expected before the Bill progresses through all legislative stages.
If you have questions about the proposed Bill, would like some help with submissions on the Bill or guidance tailored to your situation, don’t hesitate to reach out to Douglas Lawyers - info@douglaslawyers.co.nz
