Employment Law Changes – An Opportunity for Employers
7 April 2026
On 21 February 2026 significant amendments to the Employment Relations Act 2000 came into force. It is important for employers to now ensure they comply with the new law.
Review Your Contractor Agreements
One of the most controversial changes is the introduction of a statutory “gateway test” to determine whether a worker will be excluded from the definition of an employee under the Act.
Now, if the following five criteria are satisfied, a worker will not be considered as an employee:
- There is a written agreement which specifies that the worker is a contractor.
- The worker is given a reasonable opportunity to seek independent advice before signing the agreement.
- The worker is not prevented from working for others.
- The worker is not restricted to working at certain times, on certain days or for a minimum period and is allowed to subcontract the work (subject to vetting for compliance with statutory requirements, or where it’s justified because the nature of the work requires particular qualifications or criminal record checks).
- The agreement cannot be terminated if the worker declines work.
If a contracting arrangement satisfies all five statutory criteria, the worker will be classified as a “specified contractor” and not an employee.
If the criteria are not met, the previous test will apply. This means that the “real nature of the relationship” test will apply and examination of factors such as control, economic reality, integration, and the parties’ intentions will be undertaken to determine whether a worker is a contractor or an employee.
This change offers an excellent opportunity for businesses that can accommodate the gateway test criteria for its workers. Businesses should now review and update their contractor agreements to utilise the new law where possible so as to minimise any risk about whether its workers are employees.
Review Terms for Your Senior Employees
Under the new law, employees earning $200,000 or more annually cannot bring personal grievances for unjustified dismissal unless their employer has previously
agreed that unjustified dismissal protections will still apply to their employment relationship.
These employees may still bring other forms of personal grievance claims (for example discrimination or harassment) but not claims relating to dismissal. Employees may also look to other types of claims for redress such as claiming breach of contract.
This means that employers no longer need to meet good faith obligations when choosing to terminate high-income employees, and do not have to give the employee reasons for the dismissal.
It is important to note that the $200,000 per annum threshold does not only relate to salary but includes what was paid to the employee in the 364 days before the employer gave notice of the dismissal. As such, benefits from employee share schemes, commission, bonuses and other contingent payments are included and means that an employee who has a salary of less than $200,000 may still be prevented from bringing a personal grievance if they are dismissed.
This new law applies to all new employees while a 12-month transition period applies to existing employment relationships. The $200,000 threshold will increase over time, with the first increase not occurring until after 1 July 2027.
As a result of this change we expect to see negotiations regarding notice periods, termination payments and other protections becoming more common for senior employees.
Now is the time to ensure that your employment agreements for your new senior employees:
- Clearly state personal grievance rights which are excluded.
- Specifically exclude any termination processes included in general Employer policies, handbooks and manuals.
- Include a robust termination provision with a simple exit process.
- Clearly set out notice periods, the ability for payment in lieu, and zero notice for serious misconduct.
Now is also the time to plan for the introduction of this law for your existing senior employees.
Less Concern About Process
The new law allows any decisionmaker to significantly reduce the remedies for an employee if it is established that the employee’s behaviour contributed to the situation.
The key changes are:
- If it is found that the employee’s behaviour amounted to serious misconduct and ultimately gave rise to a grievance, the Authority or Court is prohibited from awarding any remedy to the employee. There is no discretion.
- If the conduct does not amount to serious misconduct but still contributed to the grievance, the Authority or Court is prevented from ordering reinstatement or compensation for humiliation, loss of dignity or injury to feelings. As such, any remedies are limited to lost wages or benefits.
As “serious misconduct” has not been defined in the new changes, there is scope to include a definition within individual employment agreements and policies to give all parties better clarity and certainty about what behaviour would amount to “serious misconduct”.
Employers are now able to act in a more decisive and commercially sensible approach when dealing with misconduct. Any disciplinary process still needs to be fair and undertaken in good faith, but there can now be less fear about technical issues when employee misconduct is clear. Employers should ensure that their managers are trained to identify risk under the new regime, and should review their disciplinary processes to reflect this simpler regime.
Review Your Trial Period Provisions
The new law further limits the personal grievance claims that can arise from a dismissal during a trial period. No longer can personal grievances for unjustified disadvantage be brought.
The technical requirements for trial periods remain strict so many disputes will likely centre on whether the trial period was properly established.
We consider this change now limits any claims arising out of a dismissal during a trial period to discrimination, breach of good faith, or other causes of action .
Employers should update their trial period provisions to make it clear when an employee is prevented from raising a personal grievance. It is also important to maintain policies and procedures which prevent new employees from commencing work until the terms of their employment have been agreed.
Review Your New Employee Terms
The rule requiring new employees to be employed on the terms of an applicable collective agreement for the first 30 days of employment has been removed. So, employers may offer individual employment agreements immediately, but must still comply with good faith obligations when communicating with new employees about collective agreements.
We consider this change is likely to result in more employees being subject to 90-day trial periods and employers will need to be more proactive about explaining agreement options to new employees.
Conclusion
Overall, the new law presents a number of benefits to employers.
The ability to hire with more flexibility, exit employees with reduced risk and include contractors in the workplace with confidence will be welcomed.
We suggest that businesses take the time now to review and update contractor agreements and individual employment agreements and review their processes to make the most of the new changes.
Pitt & Moore’s Employment Team is well placed to assist.
Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
