Author: Rani Amaranathan, Partner, Rice Craig Barristers and Solicitors
This page covers changes to employment law under the Employment Relations Amendment Act 2026. For an overview of Rice Craig’s full employment law services, visit our Employment Law Hub.
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, primarily focusing on three areas: introducing a gateway test to define specified contractors, reducing remedies in cases where an employee contributed to their dismissal, and 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. 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 satisfy all four of the following 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 decline: 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 signing the agreement. If your business wants certainty, you may need to adapt your current approach to give contractors the flexibility required by this test.
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 behaviour — relevant for any South Auckland employer managing disciplinary processes.
What this means for employees
If you are facing a disciplinary process or dismissal, your conduct will now be the primary focus of the Employment Relations Authority or Court.
- Behaviour over process: Courts will look closely at the substance of your conduct rather than focusing solely on whether the employer made a procedural error.
- Serious misconduct: If dismissed for serious misconduct, all financial remedies or compensation are excluded under the new Act.
- Reduced remedies: If your actions contributed to the situation — even if it was not serious misconduct — the Court can now reduce your compensation by up to 100%.
- No reinstatement: You can no longer seek reinstatement if your own blameworthy conduct contributed to your dismissal.
- Procedural errors: Minor employer mistakes during a dismissal process are only penalised if they resulted in tangible unfair treatment.
What this means for South Auckland businesses
These updates simplify the disciplinary process. You are still required to act in good faith, but the law now recognises that obstructive or poor employee behaviour should have clear consequences.
| Situation | Under the Old Law | Under the 2026 Act |
|---|---|---|
| Serious Misconduct | Potential for partial compensation if the process was flawed | All remedies are excluded |
| Employee Contribution | Remedies typically reduced by a small percentage | Remedies can be reduced by up to 100% |
| Reinstatement | Often used as a primary remedy | Not available if the employee contributed to the dismissal |
Can high-income earners still claim for unjustified dismissal?
Under the 2026 Act, employees earning $200,000 or more per year generally cannot pursue a personal grievance for unjustified dismissal or disadvantage. For these employees, 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 from 2027 to keep pace with inflation.
Can parties contract out?
Yes. The law allows parties to opt out of these restrictions. If an employer and a high-earning employee agree in writing within the employment agreement to retain personal grievance protections, that agreement remains legally binding.
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 at $205,000 and, unless otherwise agreed, will not have access to unjustified dismissal claims.
— Rani Amaranathan, Partner, Rice Craig Barristers and Solicitors
| Detail | Under the 2026 Act |
|---|---|
| Annual remuneration threshold | Above $200,000 per annum. Includes base salary, bonuses, commissions, and share scheme benefits. Excludes employer KiwiSaver and ACC payments. |
| Applicability | Applies immediately to new employment agreements entered into after 21 February 2026. |
| Annual update | Threshold reviewed annually every July, starting in 2027. |
| Grace period for existing high earners | 12-month transition period ending 21 February 2027. |
| Ability to contract out | Parties can opt out of the new law to retain personal grievance protections. |
What are the practical implications for employers and employees?
These changes introduce different consequences and requirements for both parties, making it vital to understand the updates and adapt accordingly.
For employers, the changes:
- Provide guidance on who is 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 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.
Need advice on the 2026 employment law changes?
Rani Amaranathan and the Rice Craig employment law team advise employers and employees across South Auckland on compliance with the Employment Relations Amendment Act 2026, employment agreements, and personal grievance processes.
Frequently Asked Questions
When did the Employment Relations Amendment Act 2026 officially take effect?
The Act came into force on 21 February 2026.
What is the income threshold that restricts unjustified dismissal claims?
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, unless the parties have contracted out of this restriction.
What is the purpose of the new gateway test for contractors?
The gateway test provides a formal definition to determine with certainty who can be classified as a specified contractor rather than an employee, giving businesses and workers greater legal certainty about their working relationship.
Can an employee receive any remedies if they engaged in serious misconduct?
No. The Act excludes all remedies for employees who have engaged in serious misconduct.
Can employers and high-earning employees agree to retain good faith obligations?
Yes. Parties can contract out of sections 67I and 113A, retaining good faith as a requirement during dismissal if both parties agree in writing within the employment agreement.
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.
About the Author
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.
Authoritative Resources
MBIE: Employment Relations Act 2000 Amendments
Business.govt.nz: Employment changes: what you need to know
Employment New Zealand: Employee or Contractor?
Legislation.govt.nz: Employment Relations Amendment Act 2026
