Employment Relations Amendment Act 2026

The Employment Relations Amendment Act 2026 came into force on 21 February 2026, introducing significant reforms to New Zealand employment law, including, among other things, clarification on contractor status and changes to personal grievance eligibility and remedies.

Employee or Contractor?

Section 6 of the Employment Relations Act 2000 (“the Act”) now excludes a “specified contractor” from being an employee and therefore being subject to the provisions of the Act. This is intended to provide greater certainty for business owners, reducing exposure to leave entitlement liabilities and personal grievance claims.

A person (“Party A”) will be a specified contractor where Party A has an arrangement to perform work for another (“Party B”), or a third party facilitated by Party B, and all of the following are satisfied:

• The parties entered into an Independent Contractor Agreement (or an agreement stating Party A is not an employee).
• Party A is not restricted from performing work for others, except while working for Party B (or as facilitated by Party B).
• Either (i) Party A has subcontracting rights, or (ii) Party A is not required to perform, or be available to perform, work at a specified time, on a specified day, or for a minimum period.
• The arrangement cannot be terminated because Party A declines additional work.
• Party A had a reasonable opportunity to seek independent legal advice.

Party A is not treated as being restricted from working for others merely because the hours worked for Party B make additional work impracticable.

If any factor above is not met, the status of the relationship reverts to the previous “real nature of the relationship” test.

Personal grievance salary threshold

Employees who meet or exceed the “specified remuneration threshold” cannot raise:

• An unjustified dismissal claim; or
• An unjustified disadvantage claim if the claim relates to the dismissal.

The current threshold is $200,000.00 per annum, with annual increases from 1 July 2027.

Remuneration includes any PAYE income payments and employee share scheme benefits. This means that bonuses will be included in this threshold, not just base salary.

The Act prescribes a calculation method based on income received in the 364 days prior, preventing potential artificial inflation to meet the threshold for the purposes of dismissal.

Parties may contract out of this salary threshold in their Individual Employment Agreements.

This new rule will impact anyone entering into employment arrangements from 21 February 2026. Existing employees have a 12-month transitional period until 21 February 2027 before it applies.

Contributory conduct and remedies

Remedies available to an employee may be reduced or eliminated all together for contributory conduct that amounts to “serious misconduct” (section 123B). Serious misconduct is undefined in the Act, but the general legal test applied by the Authority and Court is “conduct that seriously damages the trust and confidence essential to the employment relationship that the relationship may no longer be able to continue”.  It is important to distinguish performance related issues from misconduct.

Employees who are dismissed can no longer seek reinstatement or compensation as remedies if they are found to have “contributed to the situation that gave rise to the personal grievance” (section 123C). This provision applies even if the employee’s conduct does not amount to serious misconduct.

Where to from here?

We expect to see an increase in litigation as the Employment Relations Authority / Employment Court interpret the provisions of the amended Act. In particular:

• Under the new specified contractor test, can a business restrict a contractor from working for others for the full term of the contract, or only during the times the contractor is actually performing work?
• How closely must an employee’s own actions be linked to a grievance before they lose the right to reinstatement or compensation?
• Will the Authority/ Court place more weight on the definition of “serious misconduct” in Individual Employment Agreements?

Businesses with employees should review and update their Individual Employment Agreement precedents to align with the amended Act before entering into new arrangements. This may include expressly defining key terms (for example “serious misconduct”) to assist with interpretive issues.

Businesses engaging contractors should review and update their Independent Contractor Agreements to ensure all specified contractor criteria are met.

This article is for general informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy of the information, readers should not rely on this article as a substitute for professional legal advice.