Several changes impacting on employer/employee relationships have been introduced under the Employment Relations Amendment Act 2026 with effect from 21 February 2026.

New Remuneration Threshhold for Unjustified Dismissal Claims:

A new provision has been implemented whereby employees earning more than $200,000 per year will no longer be able to raise a personal grievance for unjustified dismissal, or unjustified disadvantage relating to the dismissal. It is necessary to be aware that the $200,000 annual income threshold is based on total remuneration - this includes not only salary but also bonuses, commissions, share-related benefits and other allowances actually paid in the year before dismissal.

Employers are no longer required to comply with the usual unfair dismissal procedures, such as providing reasons or following good faith obligations, when dismissing high earner employees. Those employees do still retain rights to bring grievances on other grounds (eg discrimination, harassment, etc).

On a practical level, there is a transition period of 12 months for current employees, before the change takes effect, and even after that initial period the threshold does not automatically override existing terms and policies in employment agreements. The Act does allow parties to opt out of the new provisions.

Action: Employers and employees affected by the changes should look to renegotiate the terms of their employment agreements before the end of the transition period if appropriate. Unless there are specific provisions imposing obligations on the employer to follow a fair and reasonable process and have justifiable reason for termination, the employee will be subject to termination at will. It is however still possible for parties to opt out of the new sections under the Act and to allow an employee to retain the right to claim unjustifiable dismissal. Another option is to look at an extended notice period so an employee will have a reasonable time in which to look for a new job.

Changes to Justification for Dismissals and Reduction in Remedies:

The new law introduces stronger consequences where an employee’s conduct has contributed to a personal grievance. The amendments provide that contributory conduct can significantly reduce or eliminate remedies that were commonly previously awarded. Minor procedural defects will no longer automatically result in a dismissal being unjustified, unless the defects result in unfair treatment.

If an employee’s own behaviour contributed to the situation, for example misconduct, dishonesty, or refusal to obey reasonable instructions, the compensation which might be awarded may be reduced by up to 100%.

Where the actions of the employee amounted to serious misconduct then the Employment Relations Authority or Employment Court will not award any remedy at all.

Contractor v Employee – New “Gateway” Test:

The amendment aims to provide more upfront certainty for employers and workers to determine whether they are a contractor or an employee. The historical position has been that Courts (or the Employment Relations Authority) looked at the real nature of the working relationship between the parties to determine the worker’s status. The Employment Relations Act now sets out prescribed criteria that, if met, will recognise a worker as a specified contractor and exclude them from the definition of an employee.

The key criteria are:

1. There is a written agreement specifying that the worker is an Independent Contractor (or not an employee);
2. The worker is not restricted from performing work for others;
3. The worker is not under control as to how and when the work is done, or is allowed to sub-contract the work;
4. The business/employer cannot terminate the arrangement if the worker turns down additional work;
5. The worker had a reasonable opportunity to seek independent advice before entering into the agreement.

If any of the gateway test criteria are not met, the existing common law test of employment status will still be used.

Conclusion – Action:

In light of the changes which have been introduced it will be important to review and amend terms of existing employment agreements, particularly for employees on or approaching the high threshhold remuneration level, within the next 12 months.

When entering into a new arrangement to engage a worker or to undertake work, consider whether the criteria are met to be defined as an independent contractor rather than employer.

When actions or conduct of an employee bring disciplinary action into consideration, take into account whether the employee’s behaviour is of such a level that it may impact on the justification for dismissal.