Employers need to be aware of significant changes to employment regulations now the Employment Relations Act Amendment Bill has passed into law (on 21 February 2026).
The Bill makes 4 amendments to the Employment Relations Act 2000:
- 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.
- Removing the “30-day rule” for workplaces with collective employment agreements.
Workplace Relations and Safety Minister, Brooke van Velden, said the changes are aimed at improving labour market flexibility and helping businesses grow, innovate, and employ with confidence and certainty.
Let’s have a look at the details of the changes:
Contractor arrangements
The bill introduces a new “gateway test” to determine if a worker is an employee or a contractor.
A person will be classified as a “specified contractor” when:
- There is a written agreement that specifies they are an independent contractor (or "not an employee").
- The worker is allowed to work for another person, but not at the same time as working for the person they have an agreement with.
- The worker can either:
- choose when to work (i.e. they are not required to be available to work certain times/days/for a minimum period); or
- sub-contract the work to a third party.
- They can decline an offer of additional work without the agreement being terminated.
- They are given reasonable time to seek independent advice prior to entering the agreement.
If the working arrangement meets these 5 tests, then the worker will be considered a contractor and not an employee. If they do not meet all the criteria, you need to use the common law test (4 legal tests to establish the true nature of the relationship) to establish if they are a contractor or an employee.
Workers who meet the gateway test will not be able to challenge their employment status with the Employment Relations Authority.
The gateway test came into law on 21 February 2026 and is not retrospective (i.e. you must use the the common law test for any period before 21 February 2026).
Our advice
If you are entering into a working arrangement with an independent contractor, make sure you:
- Have a watertight written agreement that specifies the person is an independent contractor or "not an employee".
- Give the person the opportunity to seek independent advice on the agreement before they sign it.
- Meet obligations around allowing the contractor to work for others and decline additional work or sub-contract it to third parties.
Given the debate around this bill and especially this issue, the new gateway test could become a political football and could be repealed if there is a change in government.
Personal grievance changes
Increased scrutiny of employee conduct
The Employment Relations Authority and the Employment Court will now consider whether the employee’s actions contributed to a situation that gave rise to a personal grievance and to give more consideration to employee behaviour when awarding remedies.
Under the changes:
- If an employee's behaviour contributed to the situation that led to the personal grievance, remedies may be reduced by up to 100%.
- Employees whose conduct contributed to the personal grievance (but wasn't “serious misconduct”) cannot be reinstated to a role, or receive compensation for hurt and humiliation or loss of any benefit.
- Employees whose behaviour amounts to serious misconduct are ineligible for any remedies.
Our advice
It may be tempting - in what appears to be an obvious case of serious employee misconduct - to shortcut the disciplinary or termination process, however, what constitutes “serious misconduct” is not defined in legislation, so employers will still need to be able to prove the threshold has been met.
Similarly, how much an employee’s behaviour contributed to a situation (or obstructed the employer) hasn’t been specified, so we may see this clarified by court rulings.
Read more in-depth discussion of the implications of these changes.
Income cap for unjustified dismissal claims
The bill introduces an income threshold of $200,000 for personal grievance claims for:
- Unjustified dismissal.
- Unjustified disadvantage where the unjustified disadvantage relates to dismissal (but not to other personal grievance grounds).
Employees whose annual remuneration is $200,000 or more can no longer file a claim, however, they are still be able to raise other claims, e.g. for discrimination.
Employers and employees can contract back into unjustified dismissal protection or agree their own terms and conditions relating to dismissals.
The bill includes a 12-month transitional period during which employees on existing employment agreements can raise an unjustified dismissal personal grievance, unless they agree to vary their employment agreement and have the threshold apply early.
The threshold may be increased annually, based on average weekly earnings.
Our advice
Employers are no longer required to comply with good faith obligations when dismissing employees that earn $200,000 a year or more. However, you must still give the employee the notice stated in their employment agreement.
In most other cases when terminating employment, you need to ensure you have a good reason, act in good faith, and follow fair and reasonable process throughout.
High-income employees have 12 months to negotiate terms instead of the unjustified dismissal protections - e.g. termination payments, longer notice periods - or to structure their compensation packages so they fall below the income threshold.
Read our post for more detail about these changes.
Removing the “30-day rule”
The final rule change removes the employer obligation to employ new workers under the same terms as any existing collective employment agreement for the first 30 days.
The bill also removes requirements for employers to provide and return to the union an active choice form to indicate whether the employee plans to join the union. Unions are no longer able to specify the information that an employer must give to the employee about the union.
Our advice
While new employees no longer have to automatically start on the terms of a collective agreement, you still need to provide them with a copy of the collective agreement.
