Significant changes introduced by the Employment Relations Act 2026

At a glance

• The Employment Relations Amendment Act 2026 (Act) received Royal Assent on 20 February 2026 and came into force on 21 February 2026, marking a significant shift in New Zealand’s employment law.
• The Act introduces wide‑ranging reforms aimed at enhancing labour market flexibility, reducing compliance costs, and rebalancing the personal grievance system to better align employer and employee interests.
• The reforms amend the Employment Relations Act 2000 to:
  • Clarify the contractor versus employee distinction through a new five‑part 'specified contractor' gateway test.
  • Strengthen accountability for employee behaviour in the personal grievance process, including new limits and exclusions to remedies for serious misconduct and contributing behaviour.
  • Introduce a specified high‑income remuneration threshold (initially set at NZD200,000) restricting access to unjustified dismissal and some unjustified disadvantage personal grievances.
  • Make some other miscellaneous updates such as revoking the 30‑day rule and related union‑information requirements, clarifying 90-day trial period provisions, and updating the statutory test of justification. 

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Providing greater certainty for contracting parties: Contractor gateway test

The Act establishes a new specified contractor gateway test which amends the meaning of employee to exclude a specified contractor. If the arrangement meets defined criteria set out below, then the worker will be considered a specified contractor, and will be unable to proceed to the Employment Relations Authority:

• There is a written agreement that specifies the worker is an independent contractor or is not an employee.
• The worker is not restricted from working for others (not only competitors), except while performing work for the contacting party.
• The worker is:
  • not required to be available to work at any specified times or days or for a minimum period; or
  • able to sub-contract the work (subject to vetting or statutory requirements).
• The business does not terminate the arrangement for not accepting an additional task.
• The worker has had a reasonable opportunity to seek independent advice regarding the arrangement before entering into it.

Accountability for employee's behaviour in the personal grievance process 

The Act establishes:

• That if an employee's actions contributed to the situation giving rise to the personal grievance and that action amounts to serious misconduct, remedies must not be awarded to the employee.
• That if an employee's actions contributed to the situation giving rise to the personal grievance, the employee must not be awarded reinstatement or compensation payments including for humiliation, loss of dignity and injury to feelings (but they can still be awarded lost earnings).
• Clarifies that the Authority and the Employment Court have the full spectrum of remedy reductions (up to 100%) available to them.

Specified remuneration threshold for unjustified dismissal personal grievances 

A new remuneration threshold has been introduced which determines whether an employee can bring an unjustified dismissal and unjustified disadvantage personal grievance in relation to a dismissal. The new provisions:

• Apply to personal grievances for unjustified dismissal and unjustified disadvantage where the unjustified disadvantage relates to dismissal. The changes do not affect other grounds to raise a personal grievance.
• Establishes a new remuneration threshold which will initially be set at NZD200,000, being updated annually.
• Automatically exclude employees above the threshold from raising an unjustified dismissal personal grievance, with the ability for employers and employees to contract back into unjustified dismissal protection or to agree their own terms and conditions relating to dismissals.

The provisions establish that 'annual remuneration' includes PAYE income, payments made by the employer or any other benefit arising from an employee share scheme, and is calculated using a specific formula: ar = (r ÷ d) × 364

The formula calculates annual remuneration (ar) as the total remuneration that the employer has paid to the employee in the complete pay periods within the 364 days immediately before the first day of the pay period within which the employer notifies the employee of the dismissal (r), divided by the number of part or full days for which the employee has held the position with the employer in the 364 days immediately before the first day of the pay period within which the employer notifies the employee of the dismissal (d). This figure is then multiplied by 364 to establish whether annual remuneration exceeds the threshold (currently NZD200,000). 

The income threshold applies to employees on new employment agreements from 21 February 2026. There is a 12-month transitional period for employees on existing employment agreements. During this period, employment agreements will retain the ability to raise an unjustified dismissal personal grievance unless it is agreed between the parties to vary the employment agreement and have the income threshold apply early. Also, during this period, any change or employers or roles will end the existing agreement, unless the change occurs by way of restructure. 

After the transition period ends, the default position will be that high‑income employees cannot bring an unjustified dismissal or unjustified disadvantage personal grievance arising from a dismissal. If the provisions apply, employers will have a full defence to personal grievance claims relating to a failure to consult on, provide information on, or providing a reason for a dismissal. 

90-Day Trial Provisions

The Act has clarified that an employee cannot bring a personal grievance or legal proceedings in relation to in respect of a trial period dismissal including an unjustified dismissal or an unjustified disadvantage if the ground relates to the dismissal. 

Justification Test (s103A)

Additional changes to the test of justification include: 

• A requirement for the Employment Relations Authority or Employment Court to consider whether an employer has been obstructed by the employee from conducting other requirements in that test.
• The Employment Relations Authority or Employment Court cannot determine that a dismissal or action is unjustified solely for procedural defects, where the procedural defects did not result in the employee being treated unfairly. This clause previously required those defects to be 'minor'. 

Revocation of 30-day rule and reinstatement of related information requirements during the 2015-19 period

The Act removes:

• The requirement that the terms of a new employee's employment agreement reflect the terms of a collective agreement for the first 30 days of employment.
• The employer's obligation to provide an active choice form to a new employee to indicate whether they intend to join a union.
• The employer's obligation to convey the completed active choice form (if the employee returns it), or a notice that the employee did not complete and return the active choice form, to the union.
• The ability for unions to specify information that an employer must provide to the employee about the union.

However, employers will still have obligations to inform new employees that:

• A collective agreement exists and covers their work.
• They may join the union party to the collective agreement;
  about how to contact the union.
• Joining the union binds them to the collective agreement. 

Employers must also provide a copy of the collective agreement and inform the union (with an employee's agreement) that the employee has entered an individual employment agreement.

Impact 

This Act introduces key changes in New Zealand's employment landscape that will be received with open arms by some groups, and reluctantly by others. As with all new legislation, it may prompt a flurry of litigation around the definition of key phrases, including what the definition of serious misconduct is, whether an employee's annual remuneration meets or exceeds the remuneration threshold, and whether an employee has been treated 'unfairly'. While the remuneration threshold will generally begin to apply in 2027 for most employees (after the transitional period), we expect to see employees and employers strategising, planning, and / or negotiating in the interim.