The Employment Relations Amendment Act 2026: What It Means for Employers and Workers in New Zealand

The Employment Relations Amendment Act 2026 received Royal Assent on 20 February 2026 and came into force the following day, representing the most significant overhaul of New Zealand’s employment law framework since the 2018 amendments. The Act amends the Employment Relations Act 2000 across several key areas, including contractor classification, personal grievance remedies, dismissal protections for high-income earners, and the removal of the 30-day rule for new employees.

Workplace Relations and Safety Minister Brooke van Velden described the reforms as modernising the employment relations framework “for a new era,” stating the legislation was about backing businesses to hire with increased confidence. The reforms have drawn strong support from employer groups and equally strong criticism from unions and the Opposition, with NZCTU President Sandra Grey calling it a dark day for working New Zealanders.

Whether you are an employer looking to understand your new obligations, a worker questioning how these changes affect your rights, or a business engaging independent contractors, it is important to understand what has changed and what steps you should take now.

The New “Gateway Test” for Contractor Status

One of the most consequential reforms introduced by the Act is the new “gateway test” for determining whether a worker is a contractor or an employee. Previously, the classification of workers was determined by examining the “real nature” of the relationship under section 6 of the Employment Relations Act 2000, regardless of how the contract was labelled. This approach, while protective of workers, led to significant litigation and uncertainty — most notably demonstrated by the Supreme Court’s landmark decision in Rasier Operations BV v E Tū Incorporated in November 2025, which confirmed that four Uber drivers were employees, not independent contractors.

The new law inserts a category of “specified contractor” into section 6, expressly excluding such workers from the definition of employee. To qualify as a specified contractor, a contracting arrangement must satisfy all of the following criteria:

There must be a written agreement stating the worker is an independent contractor or is not an employee. The worker must have the freedom to work for others, unless temporarily restricted while performing specific work. There must be flexibility around time requirements or the ability to subcontract the work. The worker cannot be terminated for declining additional work. And the worker must have had a reasonable opportunity to seek independent advice before entering the arrangement.

If all five criteria are met, the worker is classified as a specified contractor and cannot challenge their status in the Employment Relations Authority or the Employment Court. If even one criterion is not satisfied, the existing common law “real nature” test continues to apply.

What This Means in Practice

Consider a Wellington-based construction company that regularly engages tradespeople on a project-by-project basis. Under the old framework, any of those workers could bring a claim arguing they were in substance employees, regardless of what their contracts stated. The company would then face costly litigation with an uncertain outcome.

Under the new gateway test, if the company ensures its contractor agreements meet all five criteria — including genuinely allowing the tradesperson to work for competitors, decline extra work without penalty, and seek legal advice before signing — those arrangements should be secure from challenge.

However, businesses that fail to meet even one of the five conditions will find themselves back under the old test. As DLA Piper noted in their analysis, the gateway test is a safe harbour for genuine contracting arrangements, but it requires careful compliance with every element. Employers should audit their existing contractor arrangements promptly to ensure they meet the new threshold.

The timing of this reform is notable. It arrived just months after the Supreme Court’s Uber decision, which unions argued demonstrated the problem of worker misclassification in the gig economy. The NZCTU has warned that the new gateway test could empower employers to misclassify employees as contractors, stripping them of minimum wage protections, sick leave, and KiwiSaver entitlements. The Government has maintained that the test provides clarity and certainty for both parties.

New Limits on Personal Grievance Remedies

The Act makes sweeping changes to the personal grievance system, particularly regarding how employee misconduct is treated when assessing remedies.

Under the previous law, an employee’s own behaviour could result in remedies being reduced, but not eliminated entirely. The new Act changes this in three important ways.

First, if an employee’s own conduct amounts to serious misconduct and contributed to the situation that gave rise to the personal grievance, no remedies of any kind will be awarded — not reinstatement, not lost wages, and not compensation for humiliation or hurt feelings.

Second, even where the employee’s conduct does not rise to the level of serious misconduct but is still contributory to the grievance situation, the employee will not be entitled to reinstatement or compensation for humiliation, loss of dignity, or injury to feelings.

Third, section 124 of the Employment Relations Act 2000 has been amended to allow reductions of remedies by up to 100 per cent in cases where the employee’s actions contributed to the circumstances.

Practical Example

Imagine an employee who is dismissed following a flawed disciplinary process — for example, the employer failed to provide adequate notice of a disciplinary meeting. Under the old law, the employee could successfully argue the dismissal was unjustified on procedural grounds and receive compensation, even if the underlying conduct was genuinely serious. Under the new law, if the employee’s conduct amounted to serious misconduct, the Authority may decline to award any remedies at all, notwithstanding the procedural shortcoming.

Minister van Velden framed this reform as ensuring the law stops financially rewarding employees for serious misconduct. Legal commentators have noted this will likely reduce employers’ reliance on settlement payments in misconduct-related grievances.

One area of uncertainty, as McVeagh Fleming highlighted in their analysis, is that the current Employment Relations Act does not define “serious misconduct.” This is expected to become a significant area of litigation as the ERA and the Employment Court develop case law around the new provisions.

The $200,000 Income Threshold for Unjustified Dismissal Claims

Perhaps the most widely discussed reform is the introduction of a remuneration threshold for unjustified dismissal personal grievances. Employees earning $200,000 or more in total remuneration — including salary, bonuses, commissions, and other benefits — can no longer bring a personal grievance for unjustified dismissal or for unjustified disadvantage arising from a dismissal.

Importantly, this also means employers are no longer required to follow certain good-faith procedural steps when dismissing a high-income employee, such as consultation about redundancy or providing reasons for dismissal.

Existing employees who currently earn above the threshold have a 12-month transitional period during which their current agreements remain in force. After that period, the new default applies unless both parties have agreed otherwise. Both employers and employees can contract out of the threshold, but they must actively negotiate to do so.

What Employers Should Do

Employers with senior staff earning above $200,000 should review those employment agreements now. The 12-month window is an opportunity to clarify expectations, and employers who wish to take advantage of the new flexibility should understand that affected employees may seek to negotiate additional protections — such as enhanced notice periods or contractual termination payments — in exchange for accepting the loss of their personal grievance rights.

For employees, the message is equally clear: if you earn above the threshold and your current agreement does not expressly preserve your right to bring an unjustified dismissal claim, you have 12 months to renegotiate before the default position shifts.

High-income employees should note that they retain the ability to bring personal grievances for other matters, including discrimination, harassment, and other unlawful employer conduct.

Expanded Trial Period Protections

Under previous law, a valid trial period already barred employees from bringing a personal grievance for unjustified dismissal. However, employees could still bring a grievance for unjustified disadvantage related to the dismissal — for example, arguing they were treated unfairly during the trial period in a way that disadvantaged them.

The new Act closes this gap. Employees dismissed under a valid trial period can no longer raise a personal grievance for either unjustified dismissal or unjustified disadvantage relating to the dismissal.

For employers, this provides significantly greater certainty around trial period dismissals. The reform is particularly relevant for businesses in industries with high turnover or where early performance assessment is critical.

Removal of the 30-Day Rule

Under the previous law, new employees who were not union members had to be employed on terms and conditions consistent with the applicable collective agreement for their first 30 days of employment. This was intended to protect new workers and support collective bargaining, but it also restricted employers’ ability to offer tailored terms from the outset.

The new Act removes this requirement entirely. Employers can now negotiate individual employment agreements with new staff from day one, without reference to the collective agreement.

Minister van Velden described this as restoring flexibility and reducing compliance costs. Opposition Leader Chris Hipkins countered that the change tips the power balance further towards employers and leaves workers vulnerable, particularly those with less bargaining power at the start of employment.

Clarifying the Test of Justification

The Act also refines the test of justification under section 103A. Under the amended provision, a dismissal will not be considered unjustified merely because the employer made procedural errors that did not result in actual unfairness to the employee. Additionally, the ERA and the Employment Court may now consider whether the employee obstructed the employer’s efforts during the process.

This change is designed to reduce the number of personal grievances that succeed on technical procedural grounds alone. Employers who act in substantive good faith but make minor process errors will have a stronger defence, while employees who refuse to engage constructively with their employer’s processes may find this weighed against them.

A Divisive Reform

The Employment Relations Amendment Act 2026 is undeniably employer-focused in its overall orientation. Minister van Velden has emphasised that the reforms will maximise business confidence and accelerate growth. Lane Neave, in their analysis of the Act, described it as relatively employer-focused, with the stated aim of backing businesses, promoting hiring confidence, and increasing flexibility.

On the other side of the debate, the NZCTU has called the legislation one of the most anti-worker pieces of law in recent decades. E tū national secretary Rachel Mackintosh described it as one of the most anti-worker pieces of legislation in decades. The unions’ core concern is that the reforms — particularly the contractor gateway test and the personal grievance changes — will strip away fundamental protections that workers have relied on for more than two decades.

The political context is also significant. The Act arrives months after the Supreme Court’s Uber decision, and unions have argued the legislation was drafted to override that ruling. Whether the new gateway test will withstand future legal and political scrutiny — particularly if there is a change of government — remains an open question. As MyHR observed, the new gateway test could become a political football and could be repealed if government changes.

Steps Employers Should Take Now

The changes are now in force, and employers should act promptly. Key steps include reviewing and auditing all existing contractor arrangements to ensure they meet the five-part gateway test, updating individual employment agreement templates to reflect the new personal grievance and trial period provisions, reviewing the terms for any employees earning above $200,000 and considering how the new threshold affects those relationships, revising onboarding and HR documentation to remove 30-day collective agreement alignment requirements, and updating disciplinary and performance management processes to reflect the new approach to contributory misconduct and procedural fairness.