The Minister for Workplace Relations and Safety, Hon Brooke van Velden, announced two significant changes that will tip the scales towards employers in respect of three key areas:

1. personal grievances; 
2. employee remedies; and
3. exit discussions.

These developments, together with the Minister’s announcement earlier in the year about a new gateway test for worker status, underpins the Minister’s desire to see more flexibility and choice in the New Zealand labour market. 

Personal grievances: High income threshold 

The Coalition Government plans to introduce a law that will prevent an employee who has an annual income of more than NZD180,000 from bringing an unjustified dismissal claim. The Minister has said that the income threshold will be determined by an employee’s ‘base salary’ and will exclude alternative forms of remuneration (including benefits and incentives). The Minister has also indicated that the threshold will be reviewed annually and adjusted to match increases to average earnings.

These employees will, however, be able to raise other types of personal grievances (i.e. unjustified disadvantage), as well as statutory claims (i.e., discrimination and other human rights claims) and contractual claims. They may also be able to re-open the discussion on employment-related tort-based claims [1]. 

The Minister has said that this threshold is about providing parties to an employment relationship with ‘greater choice when negotiating’. Based on statements from the Minister, we expect that parties will be able to opt out of the high-income threshold and opt back into the existing personal grievance regime. Or they may choose to negotiate their own procedures for dismissal.

This high-income threshold borrows from an existing feature in Australian laws. In conversation with our Australian colleagues at MinterEllison, we know that the high-income threshold can create a more complex claim environment. Employees who earn over the threshold still litigate, and look for alternative pathways for bringing a claim. The Australian experience tells us that we may see our relatively simple landscape become more complex.

This proposed change also marks a move away from the principle of universality that has governed New Zealand’s personal grievance regime for the past 20 years in favour of providing more flexibility and choice to employees and employers. This change is expected in 2025 through proposed amendment to the Employment Relations Act 2000.

Changes to employee remedies 

The Minister has also said that the Employment Relations Act will be amended to give more consideration to an employee’s behaviour in the context of remedies for a personal grievance.

The proposal is to remove an employee’s right to a remedy where their behaviour constitutes serious misconduct, and to prohibit an employee from seeking reinstatement and compensation for hurt and humiliation when their behaviour has contributed to the matter in dispute.

The Minister has also signalled the following ‘more technical changes’ to the way that an employee’s contributory conduct would be considered when awarding remedies:

• remedies may be reduced up to 100% to account for contributory conduct;
• the Employment Relations Authority and the Employment Court will be required to consider if the employee’s behaviour obstructed the employer’s ability to meet certain obligations; and 
• the threshold for ‘procedural error’ will be raised where the employer’s actions are fair in all the circumstances. 

Exit discussions: Protected negotiations

Last month, ACT MP Laura Trask’s Bill was drawn from the Members' ballot and introduced into Parliament. Like the high-income threshold, the purpose of the Employment Relations (Termination of Employment by Agreement) Amendment Bill (Bill) is to provide parties to an employment relationship with flexibility to negotiate the termination of employment. 

Under this Bill, employers would be able to make an offer to an employee for the purposes of negotiating the termination of their employment. Critically, the offer of an exit settlement would not create grounds for a personal grievance claim (now, such conversations can give rise to an unjustified constructive dismissal claim).

This Bill is based on similar legislation in the United Kingdom which enables employers to have protected conversations with employees about terminating the employment relationship.

Given that the Bill is currently a Member’s Bill (and not a Government Bill), whether the Bill will continue to progress through the House, and in what form, remains to be seen. However, it is consistent with ACT’s overall philosophy to employment relations, so may gain the support of the Coalition Government more broadly, and it is certainly something for employers to keep an eye on.

Our thoughts 

There will be concerns from some areas that these proposals are not easily aligned with the stated objectives of the Employment Relations Act, some recent judgments of the Employment Court, and New Zealand’s commitments under International Labour Organisation Conventions.

In our view, a careful balance will need to be struck to ensure that any increased flexibility and choice is appropriately balanced against fundamental employment protections especially those for less senior employees. Like how the employment institutions have treated 90-day trial periods, we expect any legislation that limits fundamental employment protections to be narrowly interpreted and rigorously tested by our employment institutions and appellate courts. It will be important for the legislative wording to be clear and for employers to make sure they adhere to the letter of the legislation.

We will continue to monitor the progression of these proposed legislative developments. If you have any questions or require any assistance in the meantime, please get in touch. Our employment team is more than happy to assist.

See more:

More flexible dismissal process for high-income employees
Removing rewards for poor employee behaviour
Employment Relations (Termination of Employment by Agreement) Amendment Bill
Increased certainty for contractors coming
 

Footnote

[1]  The Supreme Court in FMV v TZB [2021] NZSC 102 acknowledged that it had effectively abolished employment-related tort-based claims when it expanded/simplified the jurisdiction of the Employment Relations Authority.

This article was co-authored by Isabella Denholm, a Solicitor in our Employment team.