The much-anticipated Employment Relations Amendment Bill was introduced to the House yesterday and awaits its first reading. The Bill contains amendments to the Employment Relations Act 2000 as promised by Workplace Relations and Safety Minister, Hon. Brooke van Velden during the course of this year, along with a few additions which we outline in this article. The Bill largely  aligns with previous announcements, presenting no big surprises.

On releasing the Bill, the Minister announced that the amendments “will improve labour market flexibility and help businesses to grow, innovate, and employ with confidence and certainty.”

Key changes introduced in the Bill

The Bill contains the following proposed amendments to the existing employment law regime.

Contractor ‘gateway test’

The contractor ‘gateway’ test proposed in the Bill has five factors, rather than the four previously announced by the Minister. If the working arrangement meets the five factors set out below, then the worker will be considered a contractor (and will have no right to challenge this in the Employment Relations Authority). If one or more of these factors is not met, then the worker will be able to proceed with a claim, and the existing “control”, “integration” and “fundamental” tests outlined in our previous article will apply. 

The Bill includes a new definition of a contractor (which is excluded from the definition of employee) who is a person that has an arrangement with a contracting party and:

1. has a written agreement that defines them as an independent contractor; and
2. is not restricted from performing work for another party, except while performing work for the contracting party; and 
3. is not required to be available for work at any specific time or for any specific period, or they are permitted to subcontract any work under the arrangement to a third party (subject to any vetting requirements of the contracting party to ensure compliance with any relevant statutory requirements); and
4. the arrangement does not terminate if the person refuses an additional offer of work; and
5. the person had a reasonable opportunity to seek independent advice before entering into the arrangement.

It is worth noting that test 2 above does not expressly refer to “competitors” as was previously announced by the Minister. On the face of the Bill, it appears the new test would prohibit the use of non-competes for contractors, but it remains to be seen how far “performing work” will extend in the context of the wider engagement. 

Removing awards for poor employee behaviour

The proposed amendments are outlined in our previous article. In short, the Bill proposes amendments which:

• enable the Authority or the Court, if it has determined that an employee has a personal grievance, to reduce by 100% a remedy that would otherwise be awarded to an employee whose actions contributed to the situation that gave rise to the personal grievance.
• prevent the Authority or the Court, in settling a personal grievance, from:
  • providing reinstatement or compensation to an employee if the Authority or the Court determines that an action of the employee contributed to the situation that gave rise to the personal grievance;
  • providing a remedy to an employee if the Authority or the Court determines that an action of the employee:
    • contributed to the situation that gave rise to the personal grievance; and
    • amounts to serious misconduct.

Obligations on employers who are a party to a collective agreement

For new employees who enter into an individual employment agreement with an employer party to a collective agreement covering their work, the Bill proposes to remove:

• the requirement for employee’s agreements to reflect collective agreement terms for the first 30 days of their employment; 
• the obligation for employers to provide employees with an active choice form for union membership;
• the obligation for employers to convey the active choice form or notice to the union; and
• the ability for unions to specify information that employers must provide to employees about the union.

Instead, in reducing red tape for employers, they must:

• inform new employees:
  • that a collective agreement exists and covers their work; and
  • that they may join the union party to the collective agreement; and
  • about how to contact the union; and
  • that joining the union binds them to the collective agreement; and
• provide a copy of the collective agreement; and
• inform the union (if the employee agrees) that the employee has entered an individual employment agreement.

If multiple collective agreements cover the work, the employer must:

• comply with the above requirements in relation to the collective agreement binding most of its employees; and
• inform the employee about other agreements.

Employers who fail to comply are subject to penalties imposed by the Authority, with no specified maximum penalty amount.

Income threshold for unjustified dismissal claims, exempting high earners

Unless otherwise agreed, employees earning total wages or salary of $180,000 or more per year will no longer be able to file personal grievance claims for unjustified dismissal as outlined in our previous article, nor will the employer be required to comply with its good faith requirements when making a decision to terminate. How the threshold applies to employees on existing employment agreements is also outlined in our previous article. 

The Bill also sets out the formula for how increases to the threshold will be calculated. For the purposes of the threshold, “wages or salary” will not include any other form of remuneration or a variable payment, such as an allowance, a productivity-based bonus, incentive payment, commission, overtime, employer contribution to KiwiSaver.

Key takeaways

Employers should begin to consider their bargaining strategy for individual and collective employment agreement negotiations to future proof agreements and to align with the proposed amendments. As was previously flagged by the Minister:

• Employees on existing employment agreements will retain the right to raise a personal grievance related to dismissal and the employer must comply with its good faith obligations when making a decision to terminate for 12 months following the high-income threshold taking effect, unless the parties agree otherwise. 
• Changing employers or roles ends the existing agreement, unless the change occurs by way of restructure. 
• After the transition period, the default position will be that the high-income threshold applies, preventing high-income employees from raising a personal grievance and removing the employer’s obligation to comply with its good faith obligations when making a decision to terminate in relation to dismissals occurring after the transition period. It will be a matter for negotiation as to whether employers allow high-income employees to opt back in to the unjustified dismissal framework, or to negotiate customised dismissal procedures.

Previous summaries of proposed amendments

For further information, please refer back to our previously released summaries of proposed amendments to be included in the Bill:

• Simpson Grierson - Employment Law Changes: What’s on the cards for 2024?
• Simpson Grierson - Clarity ahead over the status of Contractors?
• Simpson Grierson - Government announces income threshold for unjustified dismissal claims, exempting high earners
• Simpson Grierson - Government has announced significant employment law shake up by "removing rewards for poor employee behaviour"
• Simpson Grierson - High-earning employees will have 12 months to re-negotiate employment agreements before income threshold takes effect
• Simpson Grierson - Direct selling dilemma: employee or contractor?

Get in touch

Please feel free to reach out to any of our experts if you have any questions about the Bill, or if your organisation requires any assistance with making submissions on the Bill.

Special thanks to Caitlin Walker for her assistance in writing this article.