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Employment Relations Amendment Bill (2025)

On 18 June 2025, Workplace Relations and Safety Minister Brooke van Velden announced the introduction of the Employment Relations Amendment Bill (Bill) to Parliament, which proposes to amend the Employment Relations Act 2000 (Act). In the media release, the Minister stated that this Bill would ‘improve labour market flexibility and help businesses to grow, innovate and employ with confidence and certainty’. The public and interested groups will have a chance to submit on the Bill when it is at Select Committee, which means that it will not be progressed through Parliament with urgency.

The Bill intends to give effect to several changes promised over the last year, including:

1. The new gateway test for contractor vs employee;
2. Reducing/removing remedies ‘serious misconduct;
3. High income threshold of $180,000 above which a personal grievance for unjustified dismissal cannot be pursued; and
4. Removal of the 30-day rule relating to collective agreements and new/prospective employees: ‘employers and employees will now be free to negotiate mutually beneficial terms and conditions from the start of employment.’

Change 1: The new gateway test for contractor vs employee

• The new gateway test proposes an amendment to the definition of ‘employee’. If enacted, this means that any person who meets the below criteria will be excluded from the definition of ‘employee’ that currently applies under the Act.
• The Bill provides that a person (Person A) who performs work for another person (Person B) will be a “specified contractor” if they meet each of the following criteria:
  • Person A has a written agreement defining them as an independent contractor;
  • Person A is not restricted from performing work for another party, except while performing work for Person B;
  • Person A is not required to be available for work at any specific time or for any specific period, or they are permitted to subcontract their work under the arrangement to a third party (subject to any vetting requirements of Person B to ensure compliance with relevant statutory requirements);
  • the arrangement does not terminate if Person A refuses additional offers of work; and
  • Person A had a reasonable opportunity to seek independent advice before entering into the arrangement.
• These criteria have been in discussion for a while, however there are some notable changes not in discussion prior, for example, the requirement that Person A be had a ‘reasonable opportunity to seek advice’ before entering an arrangement.
• These changes may promote confidence when engaging contractors. However, there are questions about how the new criteria will work in practice as many current independent contractors will likely fail to meet these requirements.

Change 2: Reduction of remedies for personal grievances if a worker has committed ‘serious misconduct’

• The following changes are proposed If it is determined that an action of the employee contributed to the situation that gave rise to the personal grievance [or committed ‘serious misconduct’]:
  • the Employment Relations Authority (Authority) or the Employment Court (Court) is prevented from awarding remedies to an employee;
  • The Authority or the Court, is prevented from awarding a remedy to an employee if it determines that an action of the employee:
    • contributed to the situation that gave rise to the personal grievance; and
    • amounts to serious misconduct.
  • The Authority or Court is prevented from providing reinstatement or compensation as an award; and
  • The Authority or Court can reduce a remedy by 100% that would otherwise be awarded to an employee.
• It is noted that there is already provision in the Employment Relations Act for remedies to be reduced where there is contribution by the employee.
• Serious misconduct is not defined, which creates ambiguity when determining whether this has been met or not.
• We anticipate that there will be legal challenges with determining whether an employee’s actions have (a) contributed, and (b) are considered to be serious misconduct, if these changes are enacted.

Change 3: High income threshold

• It is proposed that if a worker earns over $180,000 gross annually, they will be excluded from pursuing an unjustified dismissal claim.
• Specifically, the changes propose:
  • When deciding whether to terminate an employee’s employment, the employer is not required to follow a good faith consultation process per section 4(1A)(c) of the Act;
  • If the employer terminates a high-income employee’s employment, they are not obliged to provide a statement explaining the reasons for dismissal as per section 120 of the Act; and
  • The employee cannot bring a personal grievance or legal proceedings regarding the dismissal, including claims of unjustified dismissal or unjustified disadvantage.
• However, the employee can still pursue a personal grievance based on unjustified disadvantage unrelated to the dismissal or discrimination, for example.
• The proposed changes include a 12-month transition period during which the new provisions will not apply to existing high-income employees. During this period, employees will still be eligible to raise unjustified dismissal claims, and it is expected that employers and employees will negotiate appropriate terms and conditions.
• A high-income threshold applies in Australia, however other legal remedies are available int hat case. Minister van Velden posits that the threshold will provide greater labour market flexibility, as high-earning workers can have organisational impacts, particularly when things go wrong. We anticipate seeing a renegotiation of terms with high income employees before these changes come into effect for them.

Change 4: Removal of the 30-day rule

• The 30 days rule is proposed to be removed, which currently requires employers to:
  • employ non-union employees on the terms of the applicable collective agreement for the first 30-days of their employment; and
  • share information about new employees to the applicable union.
• Under these changes, the employer would instead be required to provide particular information to the employee about the collective and the union including give the employee a copy of the collective agreement and inform the union (with the employee’s consent) of the employee’s new individual employment agreement with the employer.
• Removing the 30 day rule means employees and employers can negotiate from day 1 for relevant employment terms;
• this has been a political football, changing between governments.

Where to from here?

• If enacted, this Bill has the potential to significantly transform the employment law landscape.
• We expect that there will be strong views about this Bill as it progresses through Parliament, particularly around limitation of employee rights and protections which have existed in the Act for decades.

Highlights from the ERA’s Annual Report 2024

The Authority released its annual report for 2024. Insights from the report include:

• an increase of 22 percent in employment relationship problems lodged with the Authority.
• a 96% success rate in delivering determinations within three months of the investigation meeting, eight percent better than 2023.
• Of the 2,745 applications made to the Authority, about 60% were directed to mediation.
• The Authority is increasing its use of audio-visual technology within investigation meetings. The number of investigations using audio-visual technology was around double the 2023 rate.
• Exactly half of all interim reinstatement determinations resulted in the employee being reinstated; however, only five of the nineteen applications for permanent reinstatement were successful.
• Most compensation that was awarded in the Authority. In 2024 the average was between $15,000 and $20,000. The highest compensation awarded in 2024 was $105,000 in Parker v Magnum Hire Ltd [2024] NZERA 85. This consisted of two $50,000 awards for constructive dismissal and unjustified disadvantage, as well as an award of $ 5,000 for a suspension grievance.

Moving Forward

The employment space continues to change. Our team of specialists are ready to help with bespoke and practical advice and solutions on navigating the tricky employment landscape. Please do not hesitate to contact us if you need help.

Disclaimer: This update provides commentary on employment law, health and safety, and immigration topics; it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.