26 February 2026
Employer Update
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On 17 February 2026, the Employment Relations Amendment Bill 2025 passed its third reading and came into effect on 21 February 2026.
The Employment Relations Amendment Act 2026 marks some of the most significant and employer focused reforms to the employment relations landscape in New Zealand seen in recent years. Importantly, the changes signal a clear policy shift towards strengthening employer rights and providing greater certainty to businesses on matters affecting employment relations.
High-Income Earners – Personal Grievance Exclusion
One of the most commercially significant reforms is the introduction of a high-income threshold for unjustified dismissal claims.
Employees earning above $200,000 per annum total remuneration will no longer be eligible to raise a personal grievance for unjustified dismissal or unjustified disadvantage relating to dismissal, unless:
However, a 12-month transition period applies for existing employment agreements, meaning current employees can still raise claims until after the transition period ends.
Employer Impact
Reduces litigation exposure for senior executives and high-income employees and increases leverage in performance management and exit negotiations. High earning employees will need to negotiate with their employer to opt back into the personal grievance regime to raise unjustified dismissal and unjustified disadvantage claims.
Contractor Gateway Test
A new statutory ‘gateway test’ has been introduced for addressing contractor status disputes, aimed at reducing misclassification disputes under section 6 of the Employment Relations Act 2000.
To qualify, the contracting arrangement must meet the ‘specified contractor’ requirements, which are:
Employer Impact
Businesses engaging contractors should review their commercial agreements and operating practices to ensure alignment with the statutory criteria if they want protection from status challenges and to reduce exposure to costly litigation. Contractual arrangements will need updating via mutual agreement for the ‘gateway’ protection to apply.
Contributory Conduct and Financial Remedies
Previously, where an employee’s behaviour contributed significantly to the situation, financial remedies were often still available, although in some cases could be reduced for contributory conduct.
The new changes provide that where an employee’s behaviour amounts to serious misconduct and contributed to the situation giving rise to the grievance, remedies can now be declined altogether, or reduced by up to 100% for contributory conduct.
Employer Impact
Employers who follow a fair process and can clearly demonstrate serious employee wrongdoing are now in a stronger position when defending personal grievance claims and/or have increased bargaining leverage when negotiating settlements where serious misconduct occurred.
Increased 90-Day Trial Period Clarity and Protection for Employers
Previously, even if an employee was dismissed under a valid 90-day trial period, they were still able to raise unjustified disadvantage claims.
The new law precludes an employee who is dismissed under a valid trial period from raising both unjustified dismissal and unjustified disadvantage claims in respect of their dismissal.
Employer Impact
Employers must still ensure compliance with 90-day trial period requirements to ensure they are protected from claims. Where a trial period is valid, employees cannot raise unjustified disadvantage claims in relation to their dismissal during that period.
Removal of 30-Day Rule for New Employees and Information Sharing
New employees no longer automatically commence employment on collective agreement terms. However, employers must still inform new employees about any applicable collective agreement (unless the employee objects) and provide them with a copy.
Employer Impact
The removal of the 30-day rule gives employers greater flexibility to offer individual agreements from day one. While administrative requirements are reduced, employers must still provide information about any applicable collective agreement and union membership during onboarding to ensure compliance.
Changes to the Test of Justification
The test of justification continues to assess whether the employer acted as a ‘fair and reasonable employer’ could have in the circumstances, having regard to the statutory requirements. While procedural fairness remains important, the law now confirms that a dismissal is not unjustified merely because of minor procedural errors that did not cause unfairness.
The Employment Relations Authority or Employment Court may also consider whether the employee obstructed the employer’s process.
Employer Impact
This change reduces exposure to personal grievances based purely on technical process defects, strengthening an employer’s position where the substantive decision to terminate employment was justified. Employers must still follow fair process requirements in most situations.
Employer Insights
Employers should proactively review matters that impact these areas and seek assistance from Employer Pro if required.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro if in doubt on matters involving changes to employment legislation, including those related to the Employment Relations Amendment Act 2026. Employer Pro offers a range of employer focused resources and services through its competitive Employer Protection Packages.
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