The Employment Relations Amendment Bill has passed its third and final reading in Parliament. It will become law once it receives Royal assent, which is expected imminently.

This legislation introduces some of the most significant changes to NZ’s employment landscape in recent years. Employers must understand these changes to ensure their employment agreements, policies, and procedures are compliant and fit for purpose. 

Key changes in the new legislation include:

Contractor vs Employee – new “gateway test”

This will provide greater clarity about whether a worker is genuinely a contractor or an employee. Currently this is determined based on the ‘real nature of the relationship’ using a multi-factor test which can often led to uncertainty and costly litigation. The new bill introduces a ‘gateway test’ to provide greater and a clearer distinction between contractors and employees. We recommend employers ensure your written agreements and the practical reality of the working relationship reflect the working relationship the parties have agreed.

Changes to personal grievance settings

A personal grievance is a claim an employee can bring against their employer for issues like unjustified dismissal, disadvantage, or discrimination. If a grievance is upheld, remedies can include reinstatement, reimbursement of lost wages, and compensation for humiliation and distress. Currently, if an employee’s actions contributed to the situation, any remedies awarded may be reduced. The changes include strengthening how an employee’s behaviour is considered and removing eligibility for certain remedies, such as reinstatement and compensation, where serious misconduct is involved. We recommend employers define serious misconduct in your agreements and policies, and ensure any process is fair and reasonable when addressing performance or conduct concerns.

An income threshold for unjustified dismissal claims

Employees earning above a specified remuneration level (around $200,000 including bonuses and share-based payments) will not be able to bring personal grievance claims for unjustified dismissal (with transitional arrangements for existing agreements). Employers must still be aware that these employees can still raise other grievances, such as for unjustified disadvantage or breach of contract.

Repeal of the “30-day rule”

New employees covered by a collective agreement will no longer automatically have its terms apply for the first 30 days of their employment. This allows employers to hire new staff straight into individual employment agreements, even where collective agreements are in place. These should be in place before an employee commences in their role.

Most of these changes are expected to take effect shortly after Royal assent, so now is a good time for employers to review employment agreements, contractor arrangements and internal HR processes to ensure they are fit for purpose.

 If you’re unsure how these changes may affect your business or workforce, getting advice early can help reduce risk and avoid surprises. Contact us for more information.