Jenni McManus
In a hard-hitting submission that pulls no punches, The Law Association’s Employment Law Committee has slammed the key changes proposed by minister Brooke Van Velden in her controversial Employment Relations Amendment Bill and is effectively urging the government to rip it up and start again.
The bill, the committee says, proposes “multiple and very significant changes to fundamental legal principles that have stood the rest of time and about which we are unaware of any significant dissatisfaction, certainly none as would warrant such radical change.” The committee also says it is deeply concerned about the direction and scope of the bill, which amends the Employment Relations Act 2000.
“While each individual provision raises important legal and practical issues, the cumulative effect of the reforms risks dismantling fundamental protections that underpin New Zealand’s employment relations framework. The bill significantly narrows access to justice, removes expert and experienced judicial discretion and arguably weakens safeguards for vulnerable workers.
“In doing so, it departs from longstanding principles of fairness, good faith and equality before the law that have guided employment relations in this country for decades.”
The committee says several of the proposed amendments, such as the income-based exclusion from personal grievance rights, the remedies for personal grievances in circumstances where serious employee misconduct is claimed and the new contractor gateway test are not supported by evidence, “nor are they proportionate responses to demonstrated issues”.
And, the committee says, “many changes risk creating legal uncertainty, workplace conflict and reputational damage to New Zealand’s settled employment law system”.
It strongly recommends that the bill be “substantially revised” with key proposals – particularly those relating to the gateway test for specified contractors and for personal grievance exclusions – either being removed entirely or replaced with more principled, evidence-based alternatives.
“The committee opposes this bill in its current form,” the committee says. “We urge the select committee to reconsider the bill and, at a minimum, recommend substantial amendments to preserve fairness, certainty and compliance with New Zealand’s domestic and international obligations.”
Its concerns cover all key aspects of the draft legislation:
- Introducing a $180,000 income ceiling to remove access to personal grievance remedies;
- The erosion of statutory and common law rights;
- Amending core statutory definitions that risk undermining settled case law and legal certainty;
- An increased likelihood of litigation and inconsistent application of the law;
- Diluting core employment law principles that have guided New Zealand’s workplace relations for more than 30 years; and
- The likely unintended consequences of greater uncertainty and cost for all parties
In particular, the committee says, the bill shifts New Zealand’s employment relations away from the long-standing principles of fairness and good faith.
In introducing the bill to Parliament, the government said it sought to reduce compliance requirements and cost, including for SMEs, and provide greater certainty, particularly for contracting parties.
Specified contractors
Under the bill, anyone who satisfy the new “gateway test” would be deemed a specified contractor, rather than an employee (meaning they wouldn’t be entitled to benefit such as paid leave, the minimum wage or the ability to raise personal grievances).
The committee says this is a significant departure from the current legal approach which requires the Employment Relations Authority or the Employment Court to determine the “real nature of the relationship” by assessing the substance of the working arrangements. It says the gateway test oversimplifies complex working arrangements, particularly the “well-established understanding” that the true nature of working relationships may not be what they seem, regardless of how they are labelled.
The committee is also concerned about gig economy workers and labour-hire arrangements.
“Without a rigorous substance-based test, many of these workers may fall outside the scope of employment protections, despite operating in employment-like conditions…. Committee members have direct experience of acting for workers – particularly in construction, hospitality, cleaning and other low-wage sectors – who have been engaged as independent contractors despite their working arrangements bearing all the hallmarks of employment.”
It strongly recommends retaining s 6 of the current legislation, where the Authority or the Employment Court determine the real nature of the relationship based on substance over form. This, the committee says, “is well-established, flexible and better suited to the evolving nature of modern work.”
Contributing behaviour
The bill introduces two new sections which would ban the Authority or Employment Court from awarding remedies for personal grievances when an employee’s behaviour constituted serious misconduct.
The Authority and the Employment Court already have discretion in this area, depending on the circumstances. The committee is concerned that the proposal will eliminate judicial discretion and impose rigid rules, preventing any remedy from being awarded where the employee has engaged in serious misconduct.
“If the mere presence of serious misconduct is sufficient to bar all remedies, employers may be emboldened to dismiss employees without undertaking a proper investigation or process, confident that they will be shielded from any consequences,” the committee says. “This risks eroding the principle that fairness in procedure is as important as the substantial grounds for dismissal.”
It also notes that the draft legislation does not define “contribution” or “serious misconduct” so the proposed amendments are likely to generate new litigation around threshold issues, particularly about what constitutes “serious misconduct” or whether contribution has been established.
The committee strongly recommends this section be removed from the bill or, if Parliament wants to emphasise the seriousness of employee misconduct, it could do this without eliminating judicial discretion.
Income-based threshold for PGs
The committee notes that personal grievance rights have long been a foundational element in our employment relations framework.
“Since their statutory introduction in the 1970s, they have played a vital role in ensuring that all employees, regardless of income, seniority or bargaining power have access to justice and procedural fairness,” it says. Originally limited to union workers, the Employment Contracts Act 1990 extended these rights to all employees.
The committee says the proposed $180,000 threshold for raising a persona grievance is a fundamental departure from the principle that all employees are entitled to equal access to legal protection, regardless of their salary. The proposed threshold is arbitrary and, the committee says, “deeply inequitable”.
“Senior professionals, executives and specialist may be exposed to particular risks in the context of restructures, governance disputes or personality-driven dismissals. The notion that income alone equates to bargaining power or diminishes the need to legal protection fails to reflect the realities of modern workplaces,” the committee says.
The change also raises serious rule-of-law concerns. “The practical effect of the proposal is to deny legal protection to a group of employees based on an arbitrary threshold without compelling policy justification,” it says.
It also appears to extinguish not only statutory remedies but also common law rights. High earners would be barred from bringing any other legal proceeding in relation to their dismissal. This is effectively American-style “employment at will”.
“New Zealand’s employment law framework has long maintained a dual system in which statutory grievance procedures and common law contractual remedies co-exist,” the committee says. “Although claims for breach of contract at common law have become rare due to the prominence of the personal grievance regime, they remain a critical safeguard in circumstances where statutory remedies are not available.”
The bill proposes to remove the obligation for employers to act with good faith by giving these employees access to relevant information and the opportunity to comment on it prior to being dismissed. The committee says it is imperative that the right to bring proceedings for breach of good faith is preserved, even in dismissal situations for high-earning employees, and that this is made expressly clear in the bill.
“The duty of good faith is central to New Zealand’s employment law underpinning every aspect of the employment relationship,” it says. “Eroding this obligation in any way would invite adversarial approaches, discourage principled negotiations and undermine trust in employment relationships.”
The committee is critical of the bill’s emphasis on base salary rates rather than total remuneration packages. It says this appears to be deliberate “to avoid difficulties in assessing variable incentive components”. But this flies in the face of modern remuneration practices “and will inevitably give rise to inconsistent and unjust results”.
In a nutshell, the committee says, the proposed threshold “creates a highly manipulable boundary that is vulnerable to deliberate structuring for legal advantage”.
It also takes issue with the government’s assumption that it is targeting employees whose personal grievance claims might disrupt the functioning of their organisations. The committee gives examples of highly-paid professional employees – including airline pilots, hospital doctors, senior police officers, lawyers and engineers – who do not meet this governance test and whose dismissal/personal grievance would have little to no effect on the continuity or integrity of their organisations.
Transition
The bill requires all existing employment agreements to be amended within 12 months to incorporate the new income-based exclusion but is silent on what might happen if agreement isn’t reached. The committee says it appears that the new exclusion provisions will apply by default, effectively overriding existing contractual grievance rights.
It says employees will then be pressured to accept disadvantageous terms while employers will be incentivised to delay or avoid negotiations because the law will eventually take effect in their favour, whether or not the employees agree to the amendments.
The committee says this framework runs counter to the principles of good faith. The timeframe is also likely to be unworkable in organisations with large workforces such as healthcare, local government, aviation and professional services. It suggests ring-fencing existing employees’ protections and making the income ceiling exclusion applicable only to new employees and extending the transition period. Existing contractual terms should be preserved unless they are voluntarily varied by mutual agreement.
Read the committee’s submission here: TLANZ Employment Law Committee – Submissions – Employment Relations Amendment Bill 13.08.2025 (4)
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