As foreshadowed in our February 2025 article, Workplace Relations and Safety Minister Brooke van Velden has today (17 June 2025) announced the introduction of the Employment Relations Amendment Bill (Amendment Bill) to Parliament.
The Amendment Bill is intended to give effect to several reforms that Minister van Velden has announced over the last 12 to 18 months, including in relation to:
• clarifying the distinction between employment and principal/contractor arrangements,
• changing the way that personal grievance remedies are assessed,
• introducing a high income threshold for unjustified dismissal claims, and
• removing the “30-day rule” for workplaces with collective agreements.
The Amendment Bill needs to go through the parliamentary process before it takes effect. However, if enacted in its current form, the amendments would result in a significant shift in New Zealand employment law – with the pendulum swinging towards employer flexibility and certainty.
In this article, we summarise the key changes proposed in the Amendment Bill and highlight our initial thoughts as to their potential implications.
Proposed change 1: the new gateway test for independent contractors
The change
The Amendment Bill proposes an amendment to the definition of “employee” in the Employment Relations Act 2000 (Act). If enacted, this amendment would mean that any worker who performs work arrangements that meet a specific set of criteria would be a “specified contractor”, and they would be excluded from the definition of an “employee” that currently applies under the Act.1 If a worker does not meet the definition of “specified contractor”, their status as an employee would be assessed under the current definition in the Act.
More specifically, the Amendment Bill provides that a natural person (person A) who performs work for another person (person B) will be a “specified contractor” if they meet each of the following criteria:
• that arrangement includes a written agreement that specifies that person A is an independent contractor,
• person A is not restricted from performing work for any other person, except while performing work for person B,
• Either -
o person A is not required to perform, or be available to perform, work for person B at a specified time or on a specified day or for a minimum period, or
o person A is allowed to sub-contract the work for person B to another person (who may be required to undergo vetting by person B to ensure compliance with any relevant statutory requirements before being sub-contracted by person A), and
• the arrangement does not terminate if person A declines any work offered to them by person B that is additional to the work that person A agreed to perform under the arrangement, and
• person A had a reasonable opportunity to seek independent advice before entering into the arrangement.
The last criterion above, regarding a reasonable opportunity to seek independent advice before entering into the arrangement, is a new addition that was not previously signalled in earlier Government announcements.
At one time, there was discussion about the possibility that the gateway test reform might have retrospective effect. However, that is not provided for in the Amendment Bill.
Potential implications
The Minister’s announcement regarding the Amendment Bill states a belief that this new test will “provide greater certainty for all parties” and “allow more innovative business models”.2 It is not yet clear if that ambition will be achieved. As things stand right now, in practice, the proposed “specified contractor” definition is likely to benefit only a relatively small group of businesses that contract with workers on an extremely “arm’s length” basis, and in a manner that involves very little control from the principal over the work of the contractor.
In our experience, most independent contractor arrangements would not currently meet the requirements in the “specified contractor” definition. Many genuine independent contractors are still subject to certain constraints on their ability to work for other principals during an engagement, and limitations on their ability to sub-contract or use alternative workers to perform the work. Unless businesses decide to make significant changes to the way that they engage with such workers (e.g., to fall within the gateway test criteria), the workers engaged under these arrangements would still have the same rights to pursue employment misclassification claims as they do at present.
Proposed change two: changes to the way that personal grievance remedies are awarded
The change
The Amendment Bill proposes several changes to how remedies are awarded for any personal grievance.
Specifically, the Amendment Bill includes provisions that would mean that:
• an employee whose (a) action(s) contributed to the situation giving rise to the personal grievance, and (b) action(s) amounted to “serious misconduct”, will be ineligible for any remedies;
• an employee who contributed to the situation giving rise to the personal grievance (but has not committed “serious misconduct”) will not be eligible for the remedies of:
o reinstatement, or
o compensation for either (a) humiliation, loss of dignity, or injury to feelings, or (b) the loss of any benefit, whether or not monetary, that the employee might reasonably have been expected to obtain if the personal grievance had not arisen, and (in such circumstances, other remedies (such as lost wages) may still be available),
• where an employee has contributed to the situation giving rise to the personal grievance (but has not committed “serious misconduct”), any remedies awarded (e.g., lost wages) may be reduced by up to 100%.3
The implications
These proposed changes could have significant implications for how employers conduct formal employment processes.
Where an employer is confident in its assessment that an employee has committed “serious misconduct”, they may be emboldened to take a firm stance and adopt a significantly truncated employment process (on the basis that no personal grievance remedies would be available for that serious misconduct). This would be a major departure from the established natural justice and good faith rules that are currently a key feature of New Zealand employment law. That said, there will be some watchouts for employers to carefully consider. For example:
• there might be other claims and remedies available (e.g., a penalty for breach of good faith), and
• “serious misconduct” is not defined – so there is inherent ambiguity in working out whether that threshold has been met.
Proposed change three: specified threshold for unjustified dismissal claims
The change
The Amendment Bill includes provisions that would mean that:
• if, at the time of a dismissal, an employee’s annual wages or salary meets or exceeds “the specified wages and salary threshold”; and
• the employer and employee do not agree, as part of the applicable employment agreement, to opt in to the standard protections associated with an unjustified dismissal claim;
then
• in making a decision as to whether or not to terminate the employee’s employment agreement, the employer is not required to undertake a process in accordance with section 4(1A)(c) of the Act (which outlines the usual good faith consultation process);
• if the employer terminates the employee’s employment agreement, the employer is not required to comply with a request for a statement explaining the reasons for dismissal under section 120 of the Act; and
• the employee may not bring a personal grievance or legal proceedings in respect of the dismissal, including any personal grievance alleging unjustified dismissal or unjustified disadvantage. However, the employee can still pursue a personal grievance based on unjustified disadvantage that does not relate to the dismissal, or any other form of personal grievance as specified in section 103(1)(c) to (k) of the Act.
The ”specified wages and salary threshold” is NZ$180,000 per annum of base pay, which may be updated annually on 1 July based on increases in average weekly earnings measured by Statistics New Zealand. “Wages or salary” means the total amount of wages or salary payable to the employee each year by the employer as specified in, or calculated in accordance with, the employee’s employment agreement, but excludes “any other form of remuneration or a variable payment” such as allowances, incentives, overtime payments, penal rates, superannuation contributions, and payments received by an employee as an owner of the business.
There will be a 12-month transition period for employees on existing employment agreements who earn above the high-income threshold as at the date that the amendments come into force. During this period, employees will still be eligible to raise an unjustified dismissal claim, and it is expected that employers and employees will seek to negotiate appropriate terms and conditions. There are also certain “carve outs” in relation to whether an employee is a new employee during that 12-month transition period, such as in relation to employees who are redeployed within the same employer as part of a restructuring process, or whose employment transfers to a new employer as part of a sale of business transaction.
The implications
We anticipate that many employers will prefer to not “opt in” to the protections of the unjustified dismissal regime for high-income employees. However, employers may be open to achieving greater certainty around the possible “offboarding costs” for a high-income employee through agreeing at the start of employment what those costs might be. For employees to be comfortable with not opting-in to the unjustified dismissal protections, we expect that employers will be asked to consider introducing terms such as enhanced notice periods and/or severance payments, the waiver of restraints of trade in certain termination situations, and bespoke process requirements (to provide protection against an abrupt termination).
In addition, even where a high-income employee does not “opt in”, employers will need to be aware of the risk of other claims being raised on termination, such as unlawful discrimination or claims relating to matters such as an unlawful availability provision or unlawful restriction on secondary employment.
Proposed change four: removing the “30-day rule”
The change
The Amendment Bill proposes the removal of provisions in the Act which require employers to:
• employ non-union member employees whose work would fall within the coverage of an applicable collective agreement on terms and conditions based on that collective agreement for the first 30-days of their employment (“30-day rule”), or
• share information about new employees with a union unless the union objects, within a specified timeframe after they commence employment.
Instead, for employees who would currently be covered by the 30-day rule, the employer must provide certain information to the employee about the collective agreement and union, 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. Essentially, the default is that the employer and employee can agree to an individual employment agreement, but the employee will be provided with information about any collective agreement and union so that they can choose whether to join that union and fall within the collective agreement coverage.
The implications
We see that this proposed change will have significant practical implications for unionised workplaces in New Zealand. The 30-day rule imposes significant administrative and compliance burdens on employers and reduces flexibility to tailor terms and conditions for individual employees. Removing this rule and the associated information provision obligations will provide greater flexibility for employers but is likely to be seen as a threat to union membership for unions (and we anticipate it is being hotly debated for this reason).
We also anticipate that unions will seek to enshrine the 30-day rule within collective agreements as a contractual obligation, so that employers are required to adhere to the current process even after the relevant statutory provisions are repealed.
Other miscellaneous changes
There are a raft of other more minor changes proposed in the Amendment Bill, including:
• Clarifying that an employee who is dismissed during a valid trial period may not pursue any unjustified disadvantage grievance if it relates to the dismissal, but can still pursue other types of personal grievances.
• When assessing whether the test for justification for any employer action or dismissal has been met, the Authority or the court (a) will be required to consider whether the employer was obstructed by the employee from conducting the required process steps outlined elsewhere in that test; and (b) must not determine a dismissal or an action be unjustifiable solely because of defects in the process followed by the employer, if the defects did not result in the employee being treated unfairly.4
What does it all mean for employers?
The Amendment Bill is not the only vehicle for change in New Zealand employment and workplace health and safety laws in 2025. There are also several other Bills currently working their way through the parliamentary process,5 as well as the much anticipated proposed reforms to the Health and Safety at Work Act 2015.6 Together, the proposed reforms would result in a significant shift in the balance in employment relations in New Zealand – primarily in favour of business flexibility, certainty, and the reduction of cost.
No doubt, the reforms proposed in the Amendment Bill will spark significant debate, particularly by unions and workers who may perceive these changes as eroding the protections which have (for the most part) been enshrined within the Act for decades. It remains to be seen whether any such objections will have any impact on the eventual formulation of any legislation.
From our perspective, we foresee that these changes will – together – change the way that many employment processes are conducted in New Zealand. In particular, the proposed changes to the personal grievance remedies would create different risk / benefit considerations for employers, who may perceive that (a) an adverse outcome in a personal grievance claim is reduced, and (b) the remedies available for a successful personal grievance are also reduced. This may mean that litigation is less of a powerful threat (for an employee) than it has been to date. In addition, the introduction of a high income threshold for unjustified dismissal claims will potentially change the way that high income employees negotiate employment agreements (i.e., with a greater focus on the terms relating to protections against abrupt termination), and the way that they contest any dismissal that is perceived to be unfair (i.e., through the use of different claims such as unlawful discrimination).
Next steps
The Amendment Act will come into force on the day after Royal assent. Before it gets to that point, it needs to go through the parliamentary process, including public submissions and review by a Select Committee. While timing is uncertain, the Minister’s announcements have consistently indicated an intention for the reforms to be enacted within 2025.
If you have any questions about the proposed reforms, our team is providing advice to a range of clients on steps that they can take to prepare for these changes. If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.
[1] That definition requires consideration of “all relevant matters”, in order to determine the “real nature of the relationship”. In practice, where a worker challenges their classification as an independent contractor, this requires consideration of a wide range of factors and circumstances, including the terms of the parties’ contract, how the relationship operates in practice, and considerations such as control, dependence, integration, and the financial reality of the working arrangement.
[2] See New Bill to boost labour market flexibility | Beehive.govt.nz.
[3] This is a contrast to current case law, which has established that it would be highly unusual for contribution to result in a reduction to personal grievance remedies of more than 50%.
[4] Currently, the Authority or the Court must not determine a dismissal or action to be unjustifiable under this section solely because of defects in the process followed by the employer, if the defects were minor and did not result in the employee being treated unfairly.
[5] For example: the Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill, which will re-introduce the ability for employers to make partial pay deductions in response to partial strikes; the Employment Relations (Employment Remuneration Disclosure) Amendment Bill, which proposes to introduce changes to improve employee rights in relation to pay transparency; and the Employment Relations (Termination of Employment by Agreement) Bill, which proposes to introduce a statutory protection for “agreed exit” discussions between an employer and employee.
[6] As announced in early April 2025, and discussed in our article here: Health and Safety at Work Act 2015: proposed reform - Bell Gully.
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
