Employment Relations Act 2000 amendments

New gateway test for contracting arrangements

A new gateway test that businesses can use when responding to a claim that a person is an employee and not a contractor.

This means that working arrangements which meet a new smaller set of criteria will be considered to be contracting arrangements (i.e. the workers would not be considered to be employees), and will not need to apply the full test in section 6 of the Employment Relations Act 2000.

Section 6 – Employment Relations Act 2000 (external link) — New Zealand Legislation

The criteria that must all be met are:

• there is a written agreement that specifies the worker is an independent contractor; and
• the worker is not restricted from working for others; and
• the worker is:
  • not required to be available to work certain times, days or for a minimum period; OR
  • able to sub-contract the work, and
• the business does not terminate the agreement for not accepting an additional task.

Working arrangements that do not meet the exclusion criteria will continue to be assessed using the current full test in section 6 of the Employment Relations Act 2000.

The graphic below explains how this will work.

The gateway test, once in place, can be used by the Employment Relations Authority when responding to a claim that a person is an employee and not a contractor. If the working arrangement in question meets the 4 factors set out in the test, then the person is considered to be a contractor. If the 4 factors are not met, the claim would then proceed to being considered under the existing full test.

This will not impact existing employment agreements, which will continue to operate as normal.

Taking Cabinet decisions on legislative amendments to clarify the employment status of contractors is in the Government’s Q3 Action Plan.

These amendments are part of the National-ACT coalition agreement commitment to give greater weight to the intention of contracting parties, where 2 parties enter a contract for services.  

Read the Minister’s announcement: 

Increased certainty for contractors coming(external link) — Beehive.govt.nz

Proactively released documents

Changes to personal grievances

The Government has announced changes to set an income threshold above which a personal grievance could not be pursued and remove eligibility for remedies where the employee is at-fault.  

Read the Minister's announcements:

More flexible dismissal process for high-income employees(external link) — Beehive.govt.nz

Removing rewards for poor employee behaviour(external link) — Beehive.govt.nz

Introducing an income threshold for unjustified dismissal personal grievances

The Employment Relations Act 2000 will be amended to introduce a high-income threshold for unjustified dismissal personal grievance claims. 

This means that employees earning over the threshold will not be able to raise an unjustified dismissal personal grievance claim. Employers and employees will be able to agree to opt back into unjustified dismissal protection before, or at any point during, the employment relationship. 

The threshold will initially be set at $180,000 per annum of base pay, and will be updated annually

The high-income threshold will initially be set at $180,000 per annum of base pay. Base pay includes regular salary and wages, and excludes other income such as incentive payments, or benefits such as vehicle use. 

The threshold will not be adjusted for part-time employment (i.e. an employee working 20 hours per week and earning $90,000 will not be considered above the threshold). 

The threshold will be updated annually according to increases in average weekly earnings, as measured in Stats NZ Quarterly Employment Survey. See: User Guide for Stats NZ’s wage and income measures. 

User Guide for Stats NZ’s wage and income measures [PDF 318KB](external link) — Stats NZ

Employers and employees can opt back into unjustified dismissal protection, as well as continue to negotiate their own dispute resolution processes

Employees earning over the threshold can continue to raise personal grievances on other grounds, for example discrimination, sexual or racial harassment, or union duress.

As well as being able to opt back into unjustified dismissal coverage, employers and employees can continue to negotiate their own employment dispute resolution processes into their employment agreement.

Changes to remedies

Under the current law, if a personal grievance is established, the Employment Relations Authority or Employment Court may grant one or more of the following remedies to the employee:

• reinstatement of the employee in their former position or in a position no less advantageous to them,
• the reimbursement of wages or other money lost as a result of the grievance (generally up to a maximum of three months of ordinary pay, with discretion for higher reimbursement), and/or
• compensation for humiliation, loss of dignity, and injury to the feelings (hurt and humiliation) of the employee, or the loss of any expected benefit.

The Employment Relations Act 2000 will be amended to strengthen consideration and accountability for the employee’s behaviour in the personal grievance process.

To achieve this, several changes will be made to the 3 key steps in the personal grievance process: 

Step 1: When the Employment Relations Authority or Employment Court is deciding whether to establish a personal grievance:

• they will be required (in every case) to consider whether the employee’s behaviour obstructed the employer’s ability to meet their obligation to act as a fair and reasonable employer; and
• they will no longer be required to consider whether the employer’s procedural error meets the test of being ‘minor’. Instead, the focus will be on whether any errors in the employer’s process resulted in the employee being treated unfairly. 

Read information on current employer obligations:

Fair process(external link) —  Employment New Zealand 

Step 2: When the Employment Relations Authority or Employment Court is deciding whether to award remedies:

• if it is determined that the employee’s behaviour amounts to serious misconduct, the employee will not be eligible for any remedies. Examples of serious misconduct include (but are not limited to):
  • violent behaviour
  • bullying
  • sexual, racial or other harassment
  • theft or fraud
  • behaviour that endangers the health and safety of yourself or others
  • using illegal drugs at work
  • dishonesty.
• if it is determined that an employee’s behaviour contributed to the issue that gave rise to the personal grievance in any way, the employee will not be eligible to be reinstated into their role or receive any compensation for humiliation, loss of dignity, and injury to the feelings. They will still be eligible to receive lost wages.

Step 3: When the Employment Relations Authority or Employment Court are deciding whether to reduce remedies:

• the law will allow remedy reductions of up to 100 percent where an employee has contributed to the situation which gave rise to the personal grievance.

Pay deductions for partial strikes

The Government has introduced a Bill that will reintroduce partial strike provisions in the Employment Relations Act 2000. This will enable employers to make pay deductions in response to partial strike action.

Read the Minister’s announcement:

Pay deductions for partial strikes to be reintroduced(external link) – Beehive.govt.nz

Partial strikes are industrial actions that fall short of a full withdrawal of labour (eg a go-slow order, partial discontinuance of work, or work-to-rule). They also include industrial action that involves a breach of the employee’s employment agreement.

When a partial strike occurs, employers will be able to either:

• reduce an employee’s pay by a proportionate amount (calculated in accordance with a specified method that is based on identifying the work that the employee will not be performing due to the strike)
• deduct 10% of an employee’s pay.

An employer will be able to choose whether to make a deduction in response to a partial strike. If they decide to do so, the Bill requires the employer to provide written notification about the deduction to employees. 

This notice must be given as soon as reasonably practicable. It also needs to be given before the earliest of either: 

• the deduction being made, or
• by the end of the first pay period within which an employee will be paid for the period in which the partial strike (or part of a partial strike) occurred.

Employers will be required to respond to written requests from unions for information on how specified pay deductions are calculated.  

If the union disagrees with the employer’s calculation and are unable to resolve the problem with the employer, the union will be able to make an application to the Employment Relations Authority.

Specified pay deductions will not be able to be made for:

• strikes that end before the Bill comes into force, or
• any period of a partial strike that occurred before the Bill comes into force. 

Next steps

The Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill, which will reintroduce partial strike provisions, was introduced on 9 December 2024 and is now going through the parliamentary process.  

The Government aims to introduce a further Amendment Bill in 2025 to insert the new gateway test and make the changes in relation to the personal grievances.