On 17 June 2025, Workplace Minister Brooke van Velden introduced the Employment Relations Amendment Bill (the Bill) to Parliament. The Bill amends the Employment Relations Act 2000 (the Act), and makes four key amendments:
- Clarifying the definition of “employee” as opposed to specified contracting relationships.
- Removing the requirement that the terms of a new employee’s individual employment agreement (IEA) reflect the terms of a collective agreement for the first 30 days.
- Introducing a bar to unjustified dismissal grievances, such that employees earning over a specified threshold (initially set at $180,000 per annum) are not able to pursue personal grievances for unjustified dismissal.
- Changes to how remedies are assessed.
As set out in the Explanatory Note to the Bill, the Government expects the changes will: “enhance labour market flexibility, reduce compliance costs, and re-tilt the personal grievance system to better balance employer and employee interests and discourage poor behaviour.”
These changes reflect an overall attempt by the Government to “reduce red tape,” encourage flexibility, and effect changes that are, on the whole, more favourable to employers.
We set out and comment on these changes briefly below.
Employee vs Contractor
Under Section 6 of the Act, the Employment Relations Authority (Authority) or Employment Court (Court) have jurisdiction to determine whether someone is an employee or an independent contractor. This involves assessing three key factors to consider what the “real nature of the relationship is.”
Under the Bill, the Government has attempted to make the distinction between a contractor and an employee more explicit.
Where all the following five criteria apply, a person will be classified as a contractor, and will not be able to argue they should be classified as an employee.
If, however, any one of the criteria is not met, then the current test under Section 6 will apply, and the individual will be able to apply for the Authority or the Court to determine the “real nature of the relationship.”
The five criteria are:
- A written agreement with the worker, specifying they are an independent contractor; and
- The business does not restrict the worker from working for another business (except while performing work for the business); and
- The business does not require the worker to be available to work on specific times of day or days, or for a minimum period OR the worker can subcontract the work (who the business is able to vet to ensure compliance with relevant statutory requirements); and
- The business does not terminate the contract if the worker does not accept an additional task or engagement that is additional to the work the worker agreed to perform under the agreement; and
- The worker had a reasonable opportunity to seek independent legal advice before entering into the arrangement.
The fifth criteria is new and was not previously provided for in earlier government announcements.
The detail of the five criteria is expected to be further clarified as the Bill works its way through the legislative process. Questions remain, particularly how this aspect of the Bill will operate in practice. For example, will a worker be able to seek to be classified as an employee under Section 6, where the business – in practice – restricts them from working for another business due to the volume of work they are required to undertake for the business?
Salary threshold for unjustified dismissal
The Bill proposes that employees earning $180,000 or more in base salary annually (ie: excluding allowances, bonuses, overtime, and superannuation) will no longer be covered by standard protections for unjustified dismissal under the Act –unless their employment agreement explicitly opts them in.
It is noted that the income threshold may be increased annually based on average weekly earnings.
If an employee does not opt in:
- Employers won’t need to follow the usual good faith consultation process before dismissal.
- Employers don’t have to provide reasons for dismissal.
- Employees can’t bring a personal grievance for unjustified dismissal or disadvantage linked to the dismissal.
Employees will still be able to bring grievances for other areas, for example unjustified disadvantage, or discrimination.
As we’ve outlined in this earlier article, for existing employees, a 12-month transition period will apply to allow employees and employers to review and amend their employment agreements if they wish.
It is anticipated that many employers would prefer not to opt in to the protections set out in the Act for unjustified dismissal. We expect that, where this is the position, employees may look to negotiate terms to better protect them. For example, employers may see prospective employees looking to negotiate longer notice periods, agreed termination payments or to structure their remuneration package so that their salary falls below the income threshold.
30 Day Rule
The Bill removes provisions in the Act which mandate that IEAs reflect collective agreement terms for the first 30 days.
Instead, employers must provide information to the employee about the collective agreement, the union, and provide a copy of the collective agreement. It would then be up to the employee to decide from the outset of the employment whether they would like to be employed on an IEA – and negotiate the terms to that effect – or whether they would be covered by the collective agreement.
As we noted in our April 2025 Under the current 30-day rule, employees who elect to move to an individual employment agreement after the initial 30-day period are unable to have a 90-day trial period in the IEA, thereby disadvantaging the employer. One advantage of these changes is that a 90-day trial period may now be included if the employee agrees to an IEA from the outset.
Assessment of Remedies
The Bill sets out changes to the Act, such that:
- If an employee’s actions amount to serious misconduct and contribute to the grievance, they will be ineligible for any remedies.
- If the employee contributed to the situation giving rise to the personal grievance but did not commit serious misconduct, they will be barred from receiving:
- reinstatement
- compensation for humiliation, loss of dignity, or expected benefits.
- In such cases, other remedies (like lost wages) may still be awarded but could be reduced by up to 100%.
In the announcement introducing the Bill, Ms van Velden described the purpose of the change was to “ensure that hardworking New Zealanders don’t see bad behaviour rewarded.”
These changes are significant and represent a considerable reduction of remedies available for employees where contribution is a factor. Importantly, the extent to which the employee contributed to the situation which gave rise to the grievance is not specified. It is anticipated that this will be discussed during the legislative process, and amendments may be made to these sections to clarify this.
Next Steps
The Bill will become law on the day after Royal Assent. As the Bill has only very recently been introduced, it is yet to work through the legislative process, including select committee.
If you are an employer and wish for further information on the changes or advice on what you could be doing now, please reach out to our expert employment team.
