The Employment Relations Amendment Bill passed its third reading on 17 February 2026 and received Royal assent on 20 February. It is now law (as of 21 February 2026).
Workplace Relations Minister, Hon Brooke van Velden, has said this legislation will improve labour market flexibility and help businesses to grow, innovate, and employ with confidence and certainty. She has also said it will promote accountability for employee behaviour in the personal grievance process. The new legislation has mostly been well received by employers’ associations, but unions have claimed it is an attack on workers’ rights.
- The new legislation introduced some key changes to the Employment Relations Act 2000, summarised as follows:
- Providing a gateway test (or, a safe harbour) with criteria for certainty whether a worker has been engaged as an independent contractor (and not an employee).
- Changing the way personal grievance remedies are assessed, including disentitling employees who bring personal grievances even though they have engaged in serious misconduct, and their bad behaviour caused or contributed to the problem they are complaining about.
- Providing a total remuneration threshold of $200,000 per annum, so that people earning above that cannot bring a personal grievance for unjustified dismissal.
- Removing the “30-day rule” for workplaces with collective agreements.
- Gateway test/criteria for certainty that a worker is an independent contractor.
The changes introduced by the Bill mean when an employer’s engagement with a worker meets specific criteria, the worker must be considered an independent contractor, and not an employee (even if they would have previously been considered an employee by the Employment Court, following case-law like the Uber case).
The Government refers to the criteria as the “gateway” test. The criteria include:
- There is a written agreement specifying that the worker is an independent contractor.
- The worker is not restricted from also working for other businesses.
- The worker is either not required to do the work at any particular time of the day or day of the week or for a particular minimum period (i.e. as long as they get the work done, it doesn’t matter how long it takes them, or when during the week they do it) OR the worker is allowed to sub-contract the work (the businesses may vet the subcontractor only for any relevant statutory requirements).
- The arrangement does not end if the worker declines any extra work offered to by the business (i.e. that is additional to what was in the contract).
- The worker had a reasonable opportunity to seek independent advice before entering into the contract.
There are situations where a worker may be an independent contractor, but not all of the above criteria are met. If there is an agreement saying a worker is a contractor, but it doesn’t satisfy all of the above criteria, then the existing "real nature of the relationship" case-law tests will continue to apply, to determine if the worker should be considered an employee or a contractor (although, employment lawyers are wondering if the new legislation will have some influence in those sorts of cases).
This new law will generally apply to existing contractor arrangements from the commencement date (when the legislation gets Royal Assent). However, an exception is when an existing contract is already subject to ERA or Employment Court proceedings (to determine if the worker is an employee or contractor).
This is quite a big deal for hospitality, especially the accommodation sector. A lot of hotel and motel managers are on agreements that state they are contractors, but in some cases there is debate about the validity of that contractor status. This change should give hotel and motel owners more certainty when engaging managers as contractors.
Businesses that use independent contractors should get legal advice about whether their existing agreements comply (in many cases, they will need to negotiate variations if they want to be covered by these new rules).
CHANGING HOW PERSONAL GRIEVANCE REMEDIES ARE ASSESSED
For years now, businesses and employment lawyers have commonly seen situations where employers are subject to awards because they have made a technical mistake when trying to deal with bad behaviour. The new legislation aims to address that, and make misbehaving employees accountable. The changes are:
- When an employee’s actions leading to the personal grievance involve “serious misconduct”, and they contributed to the situation that gave rise to the personal grievance, the employee will not be eligible for any remedies
- When bad behaviour and/or uncooperative behaviour by employees contributed to a personal grievance (but fell short of “serious misconduct”) then they will not be eligible for reinstatement, or for hurt and humiliation type awards and any other remedies awarded (e.g. lost wages) may be reduced by up to 100% (i.e. because of the employee’s contribution to the situation).
This change should make a big difference for well-intentioned employers who try to treat employees fairly, but who get caught out by rogue employees and by the unforgiving procedural complexities of employment law.
There is a mix of clarity and confusion about when these new rules kick-in, including:
- We think these new rules will not apply to cases already before the ERA or the Employment Court (although they might have an indirect influence, such as encouraging the ERA to make better contribution awards against employee who are making claims even though they have behaved badly).
- These new rules will apply to cases where employees have behaved badly and the bad behaviour occurred any time after this legislation received Royal Assent.
- There will be debate about whether these new rules will now apply to cases where the employee’s bad behaviour has already occurred, and/or the related thing the employee is complaining about took place, before this legislation received Royal Assent.
- If these new restrictions apply where the employee’s bad behaviour occurred before the new legislation came into force - does it make a difference if the employee has given the employer notice of a personal grievance and/or been to mediation yet?
Employers should, however, be cautious about relying too much on these provisions for now. There is some uncertainty about how they will be interpreted. Because these new rules take away employees’ rights, the ERA and Employment Court might look to interpret them restrictively.
HIGH INCOME THRESHOLD FOR UNJUSTIFIED DISMISSAL CLAIMS
The new legislation provides a total remuneration threshold of $200,000 per annum, so that people earning above that potentially cannot bring a personal grievance for unjustified dismissal (the threshold initially proposed was $180,000, but based on salary only). Minister van Velden has said this change will allow employers to give workers a go in high impact positions, without having to risk a costly and disruptive dismissal process if things don’t work out.
However, employers and individual employees can agree that this new provision does not apply to them (i.e. agree that the high-earning employee retains the right to bring a personal grievance for unjustified dismissal). Many existing employment agreements expressly or implicitly specify that the parties agree to be subject to the personal grievance process, and employers with high earning employees may wish to review these agreements and consider negotiating amendments. Also, for most high-earning employees, there is a 12-month transition before this employer protection kicks in.
REMOVAL OF '30-DAY RULE' FOR COLLECTIVE EMPLOYMENT AGREEMENTS
The final change targeted in the Bill is removing the ‘30-day rule’ for collective employment agreements. Currently, when a workplace is covered by a collective employment agreement, for the first 30 days, new employees must be employed under terms no less favourable than what is in that collective (if the employee doesn’t become a member of the union within 30 days, the parties can negotiate different terms in an individual employment agreement).
The new legislation removes the 30-day rule, meaning people can agree to a wider range of employment terms from the outset, including using 90-day trials (which generally can’t be used at the moment when a collective is in place).
Most Hospitality NZ members use individual employment agreements, not collectives, so will not be impacted by this change.
SUMMARY
We think these changes are significant. Relief is on the way for some of the issues that have troubled some employers for many years. Please consider how these changes are likely to impact your business, and seek advice if necessary.