Workplace: A state of change

The employment law landscape in New Zealand is poised for significant change this year. The aim is to boost productivity, make it simpler for employers to hire and fire, and reduce compliance costs. Given some of the changes will remove existing statutory rights for employees (and case law developed by the courts), we expect the courts will interpret and apply any changes strictly (as we saw with the introduction and re-introduction of the 90-day statutory trial period). The Chief Judge of the Employment Court has recently indicated that international instruments may inform and influence the Employment Court’s interpretation and application of New Zealand laws. This means that legislation will need to be carefully worded in order to clearly reflect Parliament’s intention.

Personal grievance reform

High income threshold

Similar to existing laws in Australia, the Government has proposed a law that will prevent employees with an annual base salary of more than NZD180,000 from bringing an unjustified dismissal claim [1]. The Minister for Workplace Relations and Safety has said these changes aim to provide parties with 'greater choice when negotiating'. Parties will be able to opt back in to the existing personal grievance regime by agreement, or they may choose to negotiate their own dismissal procedures. Interestingly, Cabinet has agreed ‘in principle’ that the threshold will also apply to existing employment agreements for employees earning above the income threshold, with a 12-month transitional provision, subject to the Minister receiving further advice on this.

This proposed change is not dissimilar to other Commonwealth jurisdictions (such as Australia and the UK) but would mark a significant move away from the employee friendly protections including to have access to New Zealand’s personal grievance regime irrespective of the amount of an employee’s income.

We anticipate that disputes will arise from this law once it is in place. This is because of the material shift in employee access to litigation. Arguments may arise during pre-employment negotiations over the classification of compensation, as employees may prefer a lower base salary with higher benefits or incentive payments to retain unjustified dismissal protections. Further, parties may opt in to unjustified dismissal protections or negotiate their own dismissal procedures, so challenges by employees over the fairness and legality of those negotiations may arise, as well as whether other forums such as arbitration will be permitted to resolve disputes.

Significant changes to employee remedies

In the same pen stroke, the Government is proposing to remove all remedies for employees whose behaviour constitutes serious misconduct, as well as allowing remedy reductions of up to 100% where an employee’s behaviour has contributed to the grievance. A 100% reduction in remedies has long been sought by employers, so this will be a welcome change. Additionally, the reforms would remove an employee's eligibility for permanent reinstatement to their role if their behaviour has contributed to the grievance.

We may see the courts respond to this by ‘raising the bar’ of what constitutes serious misconduct (given it is a case-by-case assessment that is based in decades old case-law). This may open both employers and employees up to scrutiny over processes and practices that gave rise to the conduct in question.

Other legislative change

A Member’s Bill aimed at protecting exit negotiations is being considered and would give employers the ability to negotiate an exit with an employee without the risk of certain personal grievance claims. This is similar to laws in the UK that can oil the wheels of departure in a respectful and low-risk way. The courts will face the challenge of aligning this new law with existing employment laws and principles, ensuring consistent application within the broader legal framework. Again, the legislation will need to be carefully worded if disputes over the interpretation are to be avoided or at least minimised.

Worker status continues to rumble through to our highest court (the Supreme Court), with the final appeal by Uber over its decision to uphold the Employment Court’s finding that four Uber drivers were employees rather than contractors [2]. The Government’s response to this has been to propose a new legislative ‘gateway test’ for worker status [3]. This legislation would prevent independent contracting relationships from being challenged if certain tests are met. Worker status will remain a prominent issue in 2025. The court decisions to date may encourage more claims from individuals asserting they are employees. While legislative clarity will certainly help, debates over its interpretation and application can be expected.

In summary, we watch this space: draft legislation is expected in the second half of 2025. While it is will be welcome relief for employers, some of these changes will impact workers with union protections. We expect the early adopters of the relief that will be provided under new legislation will face robust challenge, and testing, by both employee representatives, unions, and in our courts. Clarity of drafting to provide certainty as to Parliament’s intention will be crucial.

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