Articles
Employment Law Changes
The Employment Relations Amendment Act 2026 became law on 21 February 2026. Below is a high-level summary of the key changes and what employers need to know.
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High-income earners
Recent amendments to the Employment Relations Act 2000 introduced a $200,000 remuneration threshold, which significantly alters personal grievance rights for high-income earners who are dismissed.
What are the key changes?
High-income earners (those earning $200,000 or more) cannot raise a personal grievance for unjustified dismissal.
The $200,000 threshold includes salary and wages, bonuses, commissions and employee share-scheme benefits. The amount is annualised over the preceding 364 days.
High-income earners may still bring personal grievances or other claims on grounds unrelated to their dismissal.
When do the changes apply?
A 12-month transition period applies to employees who were employed before the amendments came into force (February 2026). So the amendments will apply to all employees from February 2027.
The new rules apply immediately to new hires.
Where to from here?
Employers and employees may mutually agree in writing that these dismissal rules will not apply. This allows a high-income employee to retain full personal grievance rights for unjustified dismissal and may be used as a recruitment tool for senior roles.
In practice, this is unlikely to be attractive to employers.
High-income employees and their advisers are likely to place greater emphasis on robust contractual protections, such as extended notice periods or no-fault termination clauses.
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Changes to personal grievance remedies
Significant changes have been made in the personal grievance space. Where an employee is dismissed and their conduct amounts to serious misconduct, they are not entitled to any remedies.
Where misconduct is established, the Authority/Court may reduce remedies by up to 100%, including removing compensation for hurt and humiliation and eliminating reinstatement as a remedy, if the employee is found to have contributed to the personal grievance.
Where to from here?
You should review policies and employment agreements to ensure that definitions of serious misconduct remain appropriate and up to date. Lawyers and employees are likely to raise novel arguments about the definition of serious misconduct.
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Section 103A - Test of Justification
The test of justification focuses on whether the employer's actions were those that a fair and reasonable employer could have taken in the circumstances, at the time the decision was made.
The change - a dismissal will not be unjustified solely due to procedural defects unless those defects result in actual unfair treatment. This shifts the focus away from minor technical errors towards the overall substantive fairness.
New test for contractors
The amendments introduce a new 'specified contractor' gateway test for determining whether a worker can claim employee status.
If all criteria below are met, the worker cannot challenge their status:
A written agreement states the person is an independent contractor and not an employee.
The worker is not restricted from performing work for others.
The worker:
Is not required to work set days, times or hours; or
May subcontract the work
The arrangement cannot be terminated because the worker declines additional work.
The worker had a reasonable opportunity to seek independent advice.
If these criteria are satisfied, the individual will be a contractor and cannot challenge that status. If they are not satisfied the worker can still challenge their status under the traditional "real nature of the relationship" test.
Where to from here?
You should review your contractor arrangements.
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Trial periods
An employee cannot bring a personal grievance for unjustified dismissal (that remains the same) but now can't bring a personal grievance for unjustified disadvantage where their employment is terminated under a valid trial period.
Trial Periods
A trial period allows employers to assess whether a new employee is suitable for a role. During this time, an employer may dismiss the employee without the employee being able to raise a personal grievance for unjustified dismissal—provided the trial period is valid. When used correctly, trial periods can be a valuable tool for employers, but they are often challenged. It is therefore crucial to understand when they can be used and what is required.
Key requirements
The trial period clause must meet the requirements in sections 67A and 67B of the Employment Relations Act 2000.
The trial period begins on the employee’s first day of work and may last for up to 90 days.
The employment agreement must clearly state when the trial period starts and how long it will run.
Both parties must agree to and sign the employment agreement before the employee starts work.
The employee must be given a reasonable opportunity to seek independent legal advice.
The employee must be a new hire who has not previously worked for the employer.
During the 90-day period, the employer may dismiss the employee if they are not suited to the role.
The employer must give written notice of dismissal within the trial period, even if the employment end date falls after the 90-day period.
If you have any questions, please reach out.
Upcoming Changes
In September 2024, the Government announced changes to the Employment Relations Act 2000 that will introduce a new gateway test to determine whether a worker is an employee or an independent contractor. These reforms are designed to provide greater clarity for both businesses and workers, and are expected to become law in 2026.
The gateway test will serve as the starting point for assessing employment status. If all criteria are met, the worker will be classified as a contractor. If any criteria are not met, the existing tests will continue to apply.
Under the proposed changes, a worker will be considered an independent contractor if all of the following apply:
There is a written agreement that clearly designates the worker as an independent contractor.
The business does not restrict the worker from providing services to other businesses, including competitors.
The business does not require the worker to be available at specific times or for a set number of hours, and allows subcontracting of the work.
The business does not terminate the contract if the worker declines additional tasks or engagements.
Once the gateway test is formally enacted, business owners should ensure all four criteria are satisfied when engaging someone as a contractor.
Restructures
Employers can only restructure if there is a genuine business reason—such as reducing costs, improving efficiency, or achieving a strategic objective. A restructure cannot be used to remove staff for poor performance or misconduct.
The first step is preparing a business case that explains the purpose, provides relevant information, and outlines expected outcomes. Employees must receive enough detail to give feedback, suggest alternatives, or challenge the proposal.
A fair consultation process is critical. Affected employees should be given reasonable time to review the business case, ask questions, seek advice, and provide feedback. They may have a support person or representative present.
Where an employee's role is disestablished, employers must consider redeployment and consult with the employee on any suitable vacancies.