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What should employers be thinking about as Employment Relations Amendment Bill passes into law?
Yesterday, Parliament completed its third and final reading of the much-anticipated Employment Relations Amendment Bill (Bill), which was passed by 68 votes to 55. The Bill is expected to shortly receive Royal Assent, and the amendments will come into force on the following day (Commencement Date).
The new laws represent a significant shift in New Zealand’s employment law framework, changing the landscape in ways that are designed to provide greater certainty and flexibility.
What are the key changes for employers to consider and action?
| Amendment | Explanation | Employer action |
| “Specified contractor” gateway test introduced, preventing workers from challenging their status if the test is met | A “specified contractor” is a worker engaged under an arrangement that meets the following criteria:
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If employers wish to make use of this test, they should be updating their contractor agreements/arrangements to ensure they align with the relevant criteria. Employers should bear in mind that the test is not retrospective, so will only apply to arrangements in place following the Commencement Date. |
| $200,000 high income threshold will apply to prevent unjustified dismissal claims | An employer is not required to comply with certain good faith procedural requirements when terminating employment, if the employee’s annual remuneration[3] meets or exceeds $200,000[4] (High Earner). A High Earner is prohibited from bringing a personal grievance in respect of the dismissal. However, they can still bring a personal grievance (or other claim) on grounds not relating to the dismissal. The above framework does not apply to High Earners on existing employment agreements for 12 months following the Commencement Date unless the employer and employee agree, in writing, that it will apply to them within this period. Following the 12-month transition period, the framework will apply unless the employer and employee agree, in writing, to opt back into the unjustified dismissal framework. |
Employers will need to consider whether they wish to apply this framework to their “High Earners”, whether to negotiate “opting back in” to the unjustified dismissal framework, or whether to agree to alternative arrangements. The greater the bargaining power or strategic importance of an employee, the more likely it is that the employers and employees will agree to opt back into the statutory unjustified dismissal protections, or to negotiate alternative exit payment arrangements upfront. Employers should conduct any negotiations during the 12-month period, before the changes come into force. |
| Abolishing the 30-day collective agreement rule | Employers will no longer be required to:
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Employers with a union presence should update their employment agreements and processes for any new employees to account for these changes. Such employers may also now have greater flexibility to introduce terms for new employees which were previously not possible due to the operation of the collective agreement. |
What are the other changes for employers to be aware of?
While not requiring immediate action, some other amendments are noteworthy:
- There will be a stronger focus on employee conduct when assessing remedies for personal grievances:
- Compensation and reinstatement must not be awarded where the employee’s conduct contributed to the situation that gave rise to the personal grievance.
- No remedies are available if the employee’s ‘serious misconduct’ contributed to the situation that gave rise to the personal grievance.
- Whether an employee obstructed an employer’s ability to undertake a fair process is now an additional mandatory consideration when assessing whether an employer’s dismissal or action was justifiable.
- A dismissal or action must not be determined unjustifiable solely due to procedural defects, regardless of their seriousness, provided they did not result in unfair treatment.
It is important to bear in mind that there may be a period of uncertainty as we await case law guidance on the interpretation of these amendments. In general, legal changes that limit employee rights to pursue legal action are strictly interpreted, so it will be important for employers to take care in how they apply the new law.
Get in touch
Please feel free to reach out to any of our experts if you have questions on how you can best respond to these changes within your organisation.
[1] Person A is not restricted from working for others merely because the hours worked for Person B have the practical effect of limiting their ability to do so.
[2] And Person B: does not require vetting of Person C; or requires Person A to vet Person C first, to ensure compliance with relevant statutory requirements or to verify a relevant qualification and/or criminal record where justified by the nature of the work.
