When did the Employment Relations Amendment Act 2026 come into force?

The Employment Relations Amendment Act 2026 came into force on 21 February 2026. This legislation made significant changes to the existing Employment Relations Act 2000.

The Act redefined certain aspects of employment law, primarily focusing on three areas:

• Introducing a “gateway test” to define specified contractors,
• Reducing remedies in cases where an employee contributed to their dismissal,
• Restricting unjustified dismissal claims by highly paid employees.

Understanding the New “Gateway Test” for Contractors

The Employment Relations Amendment Act 2026 introduces a “gateway test” to give businesses and workers more certainty about their working relationship. Instead of the old, often confusing definitions, the law now provides a clear checklist to determine if a worker is truly a specified contractor rather than an employee.

To meet this legal test and be classified as a contractor, the worker must meet the following four criteria:

• A Clear Written Agreement: Both parties must sign a written contract that explicitly states the worker is an independent contractor and not an employee.
• Freedom to Work Elsewhere: The business cannot prevent the contractor from working for other clients, except during the specific hours they are performing work for that business.
• Flexibility in How Work is Done: The worker must have the freedom to choose when they work, or they must have the right to sub-contract the tasks to someone else.
• The Power to Say No: The contractor must be able to decline any additional tasks beyond what they originally agreed to perform.

Additionally, the business must ensure the worker has had a reasonable opportunity to seek independent advice before they sign the agreement.

If your business wants certainty, you may need to adapt your current approach. Giving your contractors the flexibility required by this test ensures you both stay on the right side of the law.

New Rules on Employee Accountability and Reduced Remedies

The Employment Relations Amendment Act 2026 introduces a significant shift in how personal grievances are decided. While the law still requires employers to act reasonably, it now places much greater weight on employee behavior.

This change is particularly relevant for the diverse workforce in South Auckland. In the past, an employer might have been ordered to pay compensation for minor procedural mistakes, even if the employee was largely at fault. The new law aims to create a fairer balance by holding employees more accountable for their actions.

What This Means for Employees

If you are facing a disciplinary process or dismissal, your conduct will now be the primary focus of the Court or the Employment Relations Authority.

• Behaviour Over Process: Courts will now look closely at the “substance” of your conduct rather than just focusing on whether the employer made a technical or procedural error.
• Serious Misconduct: If you are dismissed for serious misconduct, the law now excludes all financial remedies or compensation.
• Reduced Remedies: If your own actions contributed to the situation, even if it wasn’t “serious misconduct,” the Court can now reduce your compensation by up to 100%.
• No Reinstatement: You can no longer ask for your job back if your own “blameworthy” conduct contributed to your dismissal.
• Procedural Errors: Small mistakes made by an employer during a dismissal process will now only be penalised if they resulted in “tangible unfair treatment” toward you.

Why This Matters for South Auckland Businesses

For local employers, these updates simplify the disciplinary process. You are still required to act in good faith, but the law now recognises that an employee’s obstructive or poor behavior should have clear consequences.

Can high-income earners still claim for Unjustified Dismissal?

Under the 2026 Act, the default position has changed: employees earning $200,000 or more per year generally cannot pursue a personal grievance for unjustified dismissal or disadvantage. For these high earners, employers also have reduced “good faith” obligations and do not need to provide a formal statement of reasons for dismissal.

Calculating the $200,000 Threshold

The law uses a “Total Remuneration” approach based on what was paid over the previous 364 days.

• Included: Base salary, bonuses, commissions, and benefits from employee share schemes.
• Excluded: Employer KiwiSaver contributions, ACC payments, and one-off expense reimbursements.

Key Dates and Protections

• New Agreements: Applies to all contracts signed after 21 February 2026.
• Existing Agreements: A 12-month grace period applies. Existing “high earners” keep their protections until 21 February 2027, unless a new agreement is signed sooner.
• Annual Updates: The $200,000 limit will be reviewed every July (starting 2027) to keep pace with inflation.

Can you “Contract Out”?

Yes. The law allows parties to “opt out” of these restrictions. If an employer and a high-earning employee agree in writing to retain personal grievance protections within the employment agreement, that agreement remains legally binding.

Why this matters for South Auckland Businesses:

When hiring senior staff or specialists, it is vital to calculate the total package value. If a salary is $190,000 but includes a $15,000 bonus, that employee is over the threshold ($205,000) and, unless otherwise agreed, will not have access to unjustified dismissal claims.

Employment Law Change: High Income Threshold for Personal Grievances

What are the practical implications of these changes for employers and employees?

These changes introduce different consequences and requirements for both employers and employees, making it vital for both parties to understand the updates to adapt successfully.

For Employers, the changes could:

• Provide guidance on who is actually a specified contractor at law.
• Simplify disciplinary processes.
• Provide clearer pathways for managing high-income employees and independent contractors.

For Employees, the changes mean:

• Increased accountability and responsibility for their conduct.
• A reduction or exclusion of remedies if facing dismissal due to serious or blameworthy misconduct.
• Potential limitations on certain protections, especially for those earning high salaries.

Where can I seek expert advice on compliance with these law changes?

If you have any questions about the changes to the Act or how to ensure compliance, you can contact the expert employment law team at Rice Craig on 09 295 1700.

Frequently Asked Questions

Q: When did the Employment Relations Amendment Act 2026 officially take effect?
A: The Act came into force on 21 February 2026.

Q: What is the specified income threshold for being restricted from claiming unjustified dismissal?
A: Employees whose annual remuneration meets or exceeds $200,000 per annum may not pursue a personal grievance for unjustified dismissal or disadvantage relating to dismissal.

Q: What is the purpose of the new “gateway test” for contractors?
A: The “gateway test” provides a formal definition to determine with certainty who can be classified as a “specified contractor” rather than an employee.

Q: Can an employee receive any remedies if they engaged in serious misconduct?
A: No, the Act excludes all remedies for employees who have engaged in serious misconduct.

Q: Can employers and high-earning employees agree to retain good faith obligations during dismissal processes?
A: Yes, parties can contract out of sections 67I and 113A, retaining good faith as a requirement during dismissal if both parties agree in writing.

Resources:

MBIE: Employment Relations Act 2000 Amendments: https://www.mbie.govt.nz/business-and-employment/employment-and-skills/employment-legislation-reviews/employment-relations-act-2000-amendments

Business.govt.nz: Employment changes: what you need to know: https://www.business.govt.nz/news/employment-changes-what-you-need-to-know

Employment New Zealand: Employee or Contractor? https://www.employment.govt.nz/starting-employment/types-of-worker/employee-or-contractor

Legislation.govt.nz: Employment Relations Amendment Act 2026: https://www.legislation.govt.nz/act/public/2026/4/en/latest/#LMS1033481

How Rice Craig Can Help

Employment law is constantly changing and can be tricky for both employers and employees to navigate. Whether you are a business owner adjusting to the 2026 gateway tests or an individual navigating a new employment agreement, getting the right advice early is essential.

At Rice Craig, our Employment Law Department advises on every aspect of the employment relationship. We pride ourselves on providing clear, practical guidance from the outset. Our goal is to help you avoid legal pitfalls and ensure you get the most out of your employment relationships.

Need assistance with the new 2026 changes?

Contact our experienced team today to ensure your contracts and processes are fully compliant.

Rani Amaranathan

Rani Amaranathan is a Partner at Rice Craig Barristers and Solicitors, specialising in employment law and workplace investigations across South Auckland and the wider Auckland region.

Disclaimer:

This article is intended for general information purposes only and does not constitute legal advice. For advice specific to your circumstances, please contact the team at Rice Craig.