An array of proposals for New Zealand employment law

At a glance

• Various upcoming changes to the Employment Relations Act 2000 (ERA) are expected to be enacted in 2025. 
• They include changes to the manner in which remedies will be assessed in personal grievance claims and the introduction of an income threshold for unjustified dismissal personal grievances.
• They also include allowing an employer to make an offer to an employee for the purposes of reaching agreement to terminate an employment relationship.
• Finally, they include the ability for employers to make pay deductions in response to partial strikes. 

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Background 

Over the past few months, the New Zealand Workplace Relations and Safety Minister has released an array of new proposals that are expected be introduced in an amendment to the ERA in 2025. In addition to these proposals, the Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill has been introduced and the Employment Relations (Termination of Employment by Agreement) Amendment Bill has been drawn from the members' ballot and introduced to Parliament.

These proposed changes and bills lean more in favour of employers and reflect an alignment with the coalition government's employment law strategy. 

How employee remedies will be assessed in personal grievance claims 

Changes are proposed to the manner in which remedies will be assessed in personal grievance claims. These changes will be introduced in 2025 in an amendment to the ERA. 

The update will give more consideration to an employee's behaviour when awarding remedies as a result of a personal grievance, including:

• Removing remedies for employees where their behaviour amounts to serious misconduct.
• Removing eligibility for an employee to be reinstated into a role, and compensation for hurt and humiliation when the employee's behaviour has contributed to the issue. 
• Allowing remedy reductions of up to 100% where an employee has contributed to the situation which gave rise to the personal grievance.
• Requiring the Employment Relations Authority and court to consider if the employee's behaviour obstructed the employer's ability to meet their fair and reasonable obligations.  

The Minister has stated that these changes aim to strike a better balance and increase certainty for employers. 

Introduction of income threshold for raising an unjustified dismissal personal grievance 

Another upcoming change seeks to introduce an income threshold of NZD180,000 per annum, above which unjustified dismissal personal grievances cannot be pursued. This change has been proposed to be introduced in 2025, through an amendment to the ERA. This change is not proposed to exclude an employee from raising another type of personal grievance such as an unjustified disadvantage. 

The Minister has stated that the income threshold will be adjusted annually to mirror increases to average weekly earnings, and that the income threshold refers to regular base salary not inclusive of other income such as incentive payments or other benefits. 

The proposed changes appear to be largely similar to the Australian equivalent where the high income threshold is AUD175,000 and is adjusted annually. Restricting an avenue of redress for a class of employee will inevitably lead to alternative avenues becoming more heavily relied upon, including disadvantage grievances, Human Rights Review Tribunal actions and privacy claims.

Protected negotiations

Additionally, in November 2024, the Employment Relations (Termination of Employment by Agreement) Amendment Bill (TEA Bill) was drawn from the members' ballot and introduced into Parliament. 

The TEA Bill allows an employer to seek to terminate the employment relationship with mutual consent, enabling the employer to request that an employee execute a settlement agreement in return for specific compensation in full and final settlement of any cause of action arising out of the employment relationship. The intent of the TEA Bill is to allow conversations and negotiations to occur on a basis that does not give rise to a personal grievance. 

To date, New Zealand employers have been relying on without prejudice conversations to discuss mutually agreed terminations, but these inherently carry an element of risk. The TEA Bill reflects, and is largely consistent with, the commonly used practice of 'protected conversations' in the UK. New Zealand's current system does not provide absolute protection in this context and therefore the TEA Bill would provide greater certainty over the privileged nature of those discussions. 

As the TEA Bill is a members' bill, it is unclear whether it will progress, and if adopted, in what form. 

Pay deductions for partial strikes 

The Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill (PDPS Bill) was introduced in December 2024. The PDPS Bill allows employers to make pay deductions in response to partial strikes. A partial strike is industrial action where an employee will, for example, turn up to work, but then refuse to partake in key parts of the job that form their normal duties, instead of wholly discontinuing their employment during a strike. The PDPS Bill will largely reintroduce the provisions that were previously in place under the ERA but were removed in 2018. 

Under the current provisions, an employer is unable to make deductions from an employee's pay when they are engaged in a partial strike unless they suspend the employee or issue a lockout notice. The PDPS Bill will allow employers to:

• reduce an employee's pay by a proportionate amount (calculated in accordance with a specified method based on identifying the work the employee will not be performing due to the strike); or 
• make a deduction of 10% from the salary or wages payable to the employee for the period of the partial strike. 

An employer will be required to provide written notification to the employees that it will be reducing their pay prior to the deduction being made.