The Employment Relations Amendment Act 2026 came into effect on Saturday, 21 February 2026. It marks a major legislative overhaul of New Zealand’s employment law and is intended to provide greater clarity around contracting, refining the personal grievance process, and easing compliance burdens on employers.
Clarifying Contractor Status: The Gateway Test
One of the most notable changes is the introduction of the “gateway test” to determine whether a worker is a “specified contractor” rather than an employee. If a work arrangement meets the gateway test, the individual will be a contractor and cannot later challenge this classification through the Employment Relations Authority (ERA) or the Employment Court. This reform responds to complex cases like the recent Uber decision where the employee/contractor distinction was hotly contested.
Where the gateway test isn’t met, the test previously applied by the Courts, whereby the “real nature of the relationship” is examined, will still apply to determine whether a worker is an employee or contractor, regardless as to what their contract states. Factors such as contract, integration, and intention will still be relevant in this context.
Reforming the Personal Grievance Process
The new Act also changes the way personal grievance remedies are handled. An employee’s right to remedies is eliminated in situations where their serious misconduct contributed to the grievance. In cases of contributory conduct that do not amount to serious misconduct, employees are barred from receiving reinstatement and/or compensation for emotional harm or lost benefits. Financial compensation for lost wages may still be considered, though the Court will have full discretion to reduce this amount.
Introducing a High-Income Threshold
The ability for high-earning employees – namely employees earning over $200,000 per year – from claiming unjustified dismissal is removed under the new Act, unless their written employment agreement expressly contracts out of this exclusion.
It is important to note that this exclusion only applies to grievances linked to dismissal or disadvantage directly caused by dismissal and does not extend to claims such as discrimination. The income threshold is based solely on base salary and excludes bonuses, overtime, superannuation and KiwiSaver, or owner-related benefits. This figure will be reviewed annually in line with changes in average weekly earnings.
For “high earners” on existing employment agreements, this exclusion will not apply for the first twelve months of the Act, unless both the employee and the employer agree otherwise.
Abolishing the 30-Day Rule
The Act has repealed the “30-day rule,” which required that the terms of a new employee’s individual agreement must match those of the relevant collective agreement for the first month of employment.
Trial Period Changes – for Employers
The new Act provides greater protection for employers by barring an employee dismissed under a valid trial period from bringing a personal grievance for an unjustified dismissal or unjustified disadvantage.
It will still be important for an employer to ensure that they have strictly complied with the law in relation to trial periods to ensure that they can rely on this change.
Changes to the Justification Test
The Act changes the justification test set out in section 103A of the ERA. Previously, procedural defects could leave an employer open to risk, notwithstanding that their actions may have been substantively justified. The new Act confirms that procedural mistakes should not, on their own, render a dismissal unjustified unless those errors led to unfair treatment. Furthermore, the Act allows the ERA and Court to consider whether an employee has obstructed the employer from taking necessary steps when assessing the fairness of the employer’s actions.
What Next – Practical Steps to consider
The Act represents a clear shift in employment law. Its stated aim is to increase labour market flexibility, reduce compliance costs, and create a more balanced grievance process. While employers may benefit from increased confidence to hire and innovate, employees face notable changes to their rights and grievance options.
Given the sweeping nature of these reforms, both employers and employees will need to consider the practical effect of these changes on their own contracts and processes. Misunderstandings – particularly around the contractor test, grievance remedies, and the high-income exemption – could lead to significant legal and financial risk. We recommend that expert advice is sought when reviewing contracts, updating workplace policies, and negotiating new terms.
Harmans’ employment law team is equipped to support employees and organisations through this transition and provide comprehensive guidance on the Act.
