%20(1).webp){kind=spacer}
The Government’s Employment Relations Amendment Bill 2025 has passed its third reading on 17 February 2026, marking the most significant shift in New Zealand’s employment law settings since 2018. Most of the changes will take effect the following day after the Bill receives the Royal Assent (expected imminently).
Below is a summary of the key changes, how they differ from the current Employment Relations Act 2000, and what they will mean in practice for both employers and employees.
At present, whether a worker is an employee or an independent contractor is determined by examining the 'real nature' of the relationship, regardless of how the contract is labelled. The ERA or Court consider all relevant factors, including control, integration, and intention, which has led to significant litigation due to the unpredictability of the assessment and corresponding uncertainty.
The new law amends section 6 of the Employment Relations Act 2000 by inserting a new category of “specified contractor”, expressly excluded from the definition of employee and employment rights.
To qualify, the contracting arrangement must include:
For employers, this gateway test is intended to provide greater certainty when engaging contractors, thereby reducing the litigation risk seen in recent contractor v employee disputes. Businesses will need to ensure that they meet all of the above conditions for the worker to qualify as a contractor. If one or more of those conditions are not met, then the 'old' test, i.e., the examination of the 'real nature' of the relationship, will apply.
For workers, the new law is intended to provide increased clarity, but a higher threshold to argue they are 'really' employees. Workers should carefully assess contracting arrangements and seek advice before signing.
The new law will become applicable immediately, except where proceedings in the ERA or Court are already underway at the time of the royal assent.
Under the current Employment Relations Act 2000, employee behaviour that has contributed to the situation resulting in an employee's personal grievance may result in the ERA or Court reducing remedies, but without eliminating remedies entirely.
Under the new law, no remedies at all will be awarded if the employee’s own conduct amounted to serious misconduct and contributed to the situation resulting in the personal grievance. Also, no reinstatement or compensation will be ordered or awarded if the employee contributed to the circumstances giving rise to the personal grievance. Furthermore, section 124 of the Employment Relations Act 2000 will be amended to allow for reductions of remedies up to 100% - for example, in cases where an employee's actions do not amount to serious misconduct but are still contributory to the personal grievance situation.
In terms of practical impact, the new law will provide employers with a greater ability to defend personal grievances where employee behaviour is a significant factor. We expect a significantly reduced reliance on settlement payments in misconduct scenarios.
For employees, the stakes will be high. Misconduct that contributes to the events leading to a grievance may remove access to remedies entirely. Given that the current Act does not define 'serious misconduct', we anticipate this will be the subject of future litigation, given its material impact on employee entitlement to remedies.
Under the current law, all employees, regardless of remuneration, are entitled to challenge a dismissal by way of a personal grievance.
The new law introduces a $200,000 'total remuneration' threshold (e.g., salary plus any bonuses, commissions, etc.), and employees at or above this threshold will no longer be able to challenge their dismissal, or actions related to that, by way of a personal grievance. This also means that employers are no longer required to follow certain good-faith procedural steps (e.g., consultation regarding redundancy) when dismissing an employee whose remuneration is above that threshold.
The amended Act provides for a calculation of remuneration for the purposes of this new law.
Affected existing and new employees and employers can contract out of this 'bar', but failing an agreement to that effect, affected existing employees have 12 months to renegotiate their terms. Following that period, the new law will apply to them.
For employers, the new law provides for greater freedom to restructure or end roles and employment relationships at the highest levels without facing dismissal grievances and the associated costs. This may increase employers' confidence in hiring senior leaders earlier in their careers and provide greater flexibility to make organisational changes at a senior level.
With regard to employees, affected employees should urgently seek advice if renegotiating agreements before the 12‑month transition window closes.
Under the current law, trial periods already bar unjustified dismissal of personal grievances but still allow personal grievances for unjustified disadvantages.
The new law provides that employees dismissed under a valid trial period cannot raise a personal grievance for unjustified dismissal or unjustified disadvantage relating to the dismissal.
For employers, this brings even greater protection and more certainty that trial period dismissals or related actions will not be challengeable.
Under the current law, new employees who do not belong to a union must be employed on terms consistent with the applicable collective agreement for the first 30 days of their employment.
Under the new law, the requirement for new employees to start on terms consistent with the collective agreement for 30 days is removed.
For employers, this change restores full flexibility to negotiate individual terms from day one. The change reduces the administrative burden associated with compliance and arguably ensures greater alignment with market needs. For employees, the change brings more flexibility, but less protection, where bargaining power is unequal.
The new law provides for the following further amendments:
Clarifying the Test of Justification (s 103A)
The test of justification of an employer's actions focuses on what a fair and reasonable employer could have done. Procedural defects can expose employers to risk even when the outcome was substantively justified. The new law adds new factors confirming that a dismissal is not unjustifiable merely because the employer made procedural errors that did not result in unfairness, and it also allows the ERA or Court to consider if the employee obstructed the employer’s efforts. For employers, this change strengthens their defence where the substance was fair despite minor process missteps. Effectively, it reduces the risk of personal grievances based on “technicalities”. Employees, in turn, will need to carefully engage with their employer's processes. Obstruction can now weigh against them.
Collective Agreement Changes & Removal of Employer Information‑Sharing Duties
Currently, employers must provide certain union information and share details of new employees unless they object. The new law repeals these requirements, having the impact of allowing more flexible bargaining for individual agreements. For employers, this reduces compliance and administrative tasks and reduces the union involvement in the formation of employment relationship. Employees will have more of a responsibility to seek out union information proactively.
The changes are significant, and whilst the practical application of these changes will likely create its own challenges, it is fair to anticipate that employers will benefit significantly more from these changes than employees. Over the next few weeks, we will elaborate more on the above changes, but for now, these are the things employers and employees need to know or do now:
Employers
Employees
Please do not hesitate to contact our team for further advice and to help you with the changes you need to make now.
The Government’s Employment Relations Amendment Bill 2025 has passed its third reading on 17 February 2026, marking the most significant shift in New Zealand’s employment law settings since 2018. Most of the changes will take effect the following day after the Bill receives the Royal Assent (expected imminently).
Below is a summary of the key changes, how they differ from the current Employment Relations Act 2000, and what they will mean in practice for both employers and employees.
At present, whether a worker is an employee or an independent contractor is determined by examining the 'real nature' of the relationship, regardless of how the contract is labelled. The ERA or Court consider all relevant factors, including control, integration, and intention, which has led to significant litigation due to the unpredictability of the assessment and corresponding uncertainty.
The new law amends section 6 of the Employment Relations Act 2000 by inserting a new category of “specified contractor”, expressly excluded from the definition of employee and employment rights.
To qualify, the contracting arrangement must include:
For employers, this gateway test is intended to provide greater certainty when engaging contractors, thereby reducing the litigation risk seen in recent contractor v employee disputes. Businesses will need to ensure that they meet all of the above conditions for the worker to qualify as a contractor. If one or more of those conditions are not met, then the 'old' test, i.e., the examination of the 'real nature' of the relationship, will apply.
For workers, the new law is intended to provide increased clarity, but a higher threshold to argue they are 'really' employees. Workers should carefully assess contracting arrangements and seek advice before signing.
The new law will become applicable immediately, except where proceedings in the ERA or Court are already underway at the time of the royal assent.
Under the current Employment Relations Act 2000, employee behaviour that has contributed to the situation resulting in an employee's personal grievance may result in the ERA or Court reducing remedies, but without eliminating remedies entirely.
Under the new law, no remedies at all will be awarded if the employee’s own conduct amounted to serious misconduct and contributed to the situation resulting in the personal grievance. Also, no reinstatement or compensation will be ordered or awarded if the employee contributed to the circumstances giving rise to the personal grievance. Furthermore, section 124 of the Employment Relations Act 2000 will be amended to allow for reductions of remedies up to 100% - for example, in cases where an employee's actions do not amount to serious misconduct but are still contributory to the personal grievance situation.
In terms of practical impact, the new law will provide employers with a greater ability to defend personal grievances where employee behaviour is a significant factor. We expect a significantly reduced reliance on settlement payments in misconduct scenarios.
For employees, the stakes will be high. Misconduct that contributes to the events leading to a grievance may remove access to remedies entirely. Given that the current Act does not define 'serious misconduct', we anticipate this will be the subject of future litigation, given its material impact on employee entitlement to remedies.
Under the current law, all employees, regardless of remuneration, are entitled to challenge a dismissal by way of a personal grievance.
The new law introduces a $200,000 'total remuneration' threshold (e.g., salary plus any bonuses, commissions, etc.), and employees at or above this threshold will no longer be able to challenge their dismissal, or actions related to that, by way of a personal grievance. This also means that employers are no longer required to follow certain good-faith procedural steps (e.g., consultation regarding redundancy) when dismissing an employee whose remuneration is above that threshold.
The amended Act provides for a calculation of remuneration for the purposes of this new law.
Affected existing and new employees and employers can contract out of this 'bar', but failing an agreement to that effect, affected existing employees have 12 months to renegotiate their terms. Following that period, the new law will apply to them.
For employers, the new law provides for greater freedom to restructure or end roles and employment relationships at the highest levels without facing dismissal grievances and the associated costs. This may increase employers' confidence in hiring senior leaders earlier in their careers and provide greater flexibility to make organisational changes at a senior level.
With regard to employees, affected employees should urgently seek advice if renegotiating agreements before the 12‑month transition window closes.
Under the current law, trial periods already bar unjustified dismissal of personal grievances but still allow personal grievances for unjustified disadvantages.
The new law provides that employees dismissed under a valid trial period cannot raise a personal grievance for unjustified dismissal or unjustified disadvantage relating to the dismissal.
For employers, this brings even greater protection and more certainty that trial period dismissals or related actions will not be challengeable.
Under the current law, new employees who do not belong to a union must be employed on terms consistent with the applicable collective agreement for the first 30 days of their employment.
Under the new law, the requirement for new employees to start on terms consistent with the collective agreement for 30 days is removed.
For employers, this change restores full flexibility to negotiate individual terms from day one. The change reduces the administrative burden associated with compliance and arguably ensures greater alignment with market needs. For employees, the change brings more flexibility, but less protection, where bargaining power is unequal.
The new law provides for the following further amendments:
Clarifying the Test of Justification (s 103A)
The test of justification of an employer's actions focuses on what a fair and reasonable employer could have done. Procedural defects can expose employers to risk even when the outcome was substantively justified. The new law adds new factors confirming that a dismissal is not unjustifiable merely because the employer made procedural errors that did not result in unfairness, and it also allows the ERA or Court to consider if the employee obstructed the employer’s efforts. For employers, this change strengthens their defence where the substance was fair despite minor process missteps. Effectively, it reduces the risk of personal grievances based on “technicalities”. Employees, in turn, will need to carefully engage with their employer's processes. Obstruction can now weigh against them.
Collective Agreement Changes & Removal of Employer Information‑Sharing Duties
Currently, employers must provide certain union information and share details of new employees unless they object. The new law repeals these requirements, having the impact of allowing more flexible bargaining for individual agreements. For employers, this reduces compliance and administrative tasks and reduces the union involvement in the formation of employment relationship. Employees will have more of a responsibility to seek out union information proactively.
The changes are significant, and whilst the practical application of these changes will likely create its own challenges, it is fair to anticipate that employers will benefit significantly more from these changes than employees. Over the next few weeks, we will elaborate more on the above changes, but for now, these are the things employers and employees need to know or do now:
Employers
Employees
Please do not hesitate to contact our team for further advice and to help you with the changes you need to make now.
