The Employment Relations Amendment Act 2000 (Act) was enacted on 19 February 2026, to take effect immediately.
Employment Relations Minster Brooke van Velden states the legislation provides solutions and modernises the employment relations framework “for a new era”.
This Act represents the most significant shift in New Zealand employment law since the amendments in 2018, introducing major reforms aimed at increasing employer flexibility, redefining worker status, and reshaping dismissal and personal grievance remedies.
Key changes in the Act
The definition of an independent contractor (the ‘gateway’ test)
The Act introduces a ‘gateway test’ that determines whether a worker is a ‘specified contractor’ for the purposes of the Employment Relations Act 2000 and therefore excluded from the definition of an ‘employee’.
A worker will be a specified contractor if it meets all of the following criteria:
- A written agreement that states the worker is an independent contractor;
- The worker has freedom to work for others (note that a worker working full time hours for a principal will not always amount to a restriction on working for others);
- A worker is not required to be available at set times, and they will have the ability to subcontract;
- The arrangement does not end solely because the worker declines additional work; and
- The worker had reasonable opportunity to get independent advice before signing.
If the worker does not meet all the criteria of the gateway test, the current common law approach will continue to apply. This involves the Employment Relations Authority or Employment Court assessing the ‘real nature’ of the relationship between parties, considering factors such as control, integration with the business, and the parties’ intentions.
This clarification is intended to reduce disputes about employment status, particularly in industries that commonly engage contractors. Uncertainty surrounding contractor status has historically denied workers from accessing flexible contracting opportunities that “stifles innovation and growth” for businesses, Van Velden comments. In contrast, unions have raised concerns that the new criteria will rely too heavily on the wording of the contract, rather than the working relationship.
Changes to the remedies available for personal grievances
The Act introduces significant limitations on the remedies available to employees who raise personal grievances. These include:
- If an employee’s own actions contributed to the situation that gave rise to the personal grievance, they will not be entitled to reinstatement, or to compensation for humiliation, loss of dignity or injury to feelings.
- If an employee’s own actions amounted to serious misconduct, having contributed to the situation that gave rise to the personal grievance, the employee will not be entitled to any remedies.
A further clarification the Act makes, is that a dismissal will not be unjustified based on procedural defects alone. However, where the defects lead to the employee being treated unfairly, those procedural failings may still result in an unjustified dismissal.
High-income threshold for unjustified dismissal claims
A new annual income threshold of $200,000 (up from the proposed $180,000) will be implemented for unjustified dismissal claims. If an employee is earning at or above this threshold, they will be unable to raise a personal grievance for unjustified dismissal.
For existing employees already earning above $200,000, there will be a 12-month transition period before the new rule applies to them. This will allow time for the parties to discuss and negotiate whether they will agree to opt out of this rule.
The reform is intended to give employers greater confidence in appointing candidates to high income positions, without the risk of a costly dismissal process if the candidate is not a good fit.
30-day rule
Under the old Act, employees who are not union members must be employed for their first 30 days on the terms of any applicable collective agreement. The Act removes this requirement, meaning:
- Employers and employees can agree on individual terms from day one; and
- There is no obligation to apply collective agreement terms for the initial 30-day period.
This change is intended to increase contractual flexibility at the start of an employment relationship. Chris Hipkins has expressed concern that the change tips the power balance further to the employer and leaves workers vulnerable, driving New Zealanders to Australia where there are greater protections available. Van Velden welcomes the flexibility, stating it will allow for bespoke agreements and reduced compliance costs.
Unsure of what these changes mean for your business?
The Act is relatively employer-focused, with the stated aim of backing businesses, promoting hiring confidence, and increased flexibility in modern working arrangements. As such, there are also some major changes that limit employee protections, such as the changes to personal grievances.
It is recommended that employers review their templates for individual employment agreements, performance and disciplinary processes and contractor engagement practices.
If you would like to know more about what these changes mean for you or your business, please contact the Employment Team and Lane Neave.
