2026 Legislation Changes

The risk of costly personal grievance payouts significantly decreased effective from 21 February, with a number of changes to the Employment Relations Act 2000. While we will need to wait for some case law from the Employment Relations Authority (ERA) and Employment Court cases to confirm how the legislation will be applied, these changes will have important impacts. Here is a summary of the amendments.

1. Greater Consequences Where an Employee Contributes to a Personal Grievance

The legislation now requires the ERA and Employment Court to reduce, or in some cases remove, remedies if an employee’s actions contributed to the situation leading to the grievance. This applies even if the employer made procedural errors.

• If an employee’s behaviour has contributed to the situation giving rise to the personal grievance, they will not be entitled to reinstatement or compensation for hurt and humiliation. They will still be entitled to loss of earnings and costs.
• If the employee’s behaviour is serious misconduct, as determined by the ERA or Court, they will not be entitled to any remedies.
• Any available remedies for any matter can be reduced by up to 100% dependant on the employee’s contribution to the situation.

A note of caution – this is not a ‘get out of jail free’ card for employers. There is not a statutory definition of serious misconduct, so we anticipate the ERA and Court will ultimately provide a definition of this. In the interim we strongly recommend updating or reviewing your own Employment Agreements and/or policies to have a definition you can rely on if needed.

2. The 30‑Day Collective Agreement Rule Has Been Removed

Previously, if there was a Collective Agreement in a workplace, and a new employee’s position was covered by the coverage clause, irrespective of whether they were a union member, they had to be covered by terms of that Collective Agreement for their first 30 days. That requirement has now been removed.

New employees can now start on an individual Employment Agreement from day one.

Employees still have the right to join the union, however employers no longer need to provide the “active choice” form. There remains a requirement to give new employees information about union membership.

3. Clearer Rules for Contractor vs Employee Status (The ‘Gateway Test’)

One of the highly anticipated changes is the introduction of a new ‘gateway test’ to determine whether someone is a contractor rather than an employee. If this test is met, the worker will not be able to challenge their contractor status in the ERA. If it is not met, this doesn’t mean the person is an employee, it simply means they can challenge their status.

Under the change, a worker will be recognised as a ‘specified contractor’ if all of the gateway criteria are met:

• There is a written agreement stating they are a contractor.
• They are free to work for others.
• They have flexibility over when and how work is done, or they can subcontract.
• They cannot be terminated simply for refusing additional work.
• They were given a reasonable opportunity to seek independent advice before signing the contract.
• It does not apply retrospectively.

If any one of the criteria is not met, the usual contractor test still applies. This legislation is aimed at ‘fixing’ the Uber Supreme Court decision which determined four drivers were employees.

4. High‑Income Threshold for Unjustified Dismissal Claims

Employees earning $200,000 or more per year under new Employment Agreements can no longer raise a personal grievance for unjustified dismissal or disadvantage relating to that dismissal.

Key points:

• The threshold applies to new Employment Agreements (from 26 February) immediately.
• Existing employees have a 12‑month transition period before it applies.
• Employers and employees can agree in writing to retain dismissal protections if they wish.
• The $200k threshold includes salary, benefits that are subject to PAYE and any benefit arising from a share scheme.

Be mindful that personal grievances can still be raised for other matters such as harassment or discrimination. It is also important to note that any policies that determine processes that need to be followed, may need to be altered if you don’t want them to apply to employees paid over the threshold.

If you’d like help reviewing your Employment Agreements or understanding how these changes apply to your business, seek professional advice tailored to your situation.