The Employment Relations Amendment Bill has passed its third reading in Parliament and is expected to come into force within the next week, after it receives Royal Assent.  

The new law aims to strike a better balance between employer and employee interests, and the changes it brings will have an immediate and significant impact. We summarise the key changes below.

The key changes – what to be prepared for:

1. Contractor gateway test

One of the most talked-about changes is the introduction of a 'gateway' contractor test. This is a 'four factor' test that businesses can use to ensure a worker is classed as a contractor and not an employee – this will reduce the risk of worker status claims. To meet the criteria, principals will be required to allow contractors the freedom to work for other businesses (including competitors) or to subcontract the work. Principals will not be able to contract out of employment protections without compromising on the level of control they exert over the worker.

The new ‘gateway’ test will not apply retrospectively, meaning businesses could still face claims regarding employee status for contracts that were in place prior to the law coming into force, but only for the period up to that date.

2. No remedies in cases of serious misconduct, reduced remedies for contribution

Employees who are found to have contributed to their own personal grievance will not be entitled to compensation for hurt and humiliation or loss of benefits, though they may still claim for lost wages. If the contributing behaviour amounts to serious misconduct, no remedies are available at all. This may deter some employees from pursuing a claim in the Employment Relations Authority or Court, and remedies for successful claims will be significantly lower where there is contributory conduct.

“Serious misconduct” is not defined in the new law, and the term's meaning is likely to be the subject of litigation due to the impact on remedies. Employers should consider exercising caution and carefully assessing borderline cases until more guidance is available.

3. Limiting personal grievance claims for high earners

The new law will limit personal grievance claims for unjustified dismissal to employees earning less than $200,000. Employees earning over the cap will still be able to bring other types of claim, provided they do not relate to their dismissal.  

We expect employees earning over $200k will want to negotiate longer notice periods and redundancy compensation, or contract back into the unjustified dismissal protections. The changes will not take effect for existing employment relationships until one year after the law comes into force, allowing time for negotiation.

4. Removing the 30-day rule for collective agreements:

The '30-day rule', which currently requires employers to hire new employees on the same terms as a collective employment agreement for the first 30 days of their employment, if one is in force, will be removed.

For employers with collective agreements in force, the removal of the 30-day rule is likely to bring more flexibility to initial onboarding negotiations with new employees. Employers will still need to comply with their obligations under any existing collective agreements, including in relation to new employees who are not union members.

How to prepare

Employers will need to familiarise themselves with the changes and the practical effect they will have on their business.  

This might include:

• reviewing employment agreements, particularly for employees earning more than $200k
• considering whether any existing independent contractor relationships meet the 'gateway' test, and if not, whether the business can accommodate changes to those arrangements to bring them within the 'gateway' requirements;
• consider what changes might be required to template agreements and policies if the business won't be 'opting in' to the personal grievance regime for high income earners; and
• reviewing the terms of any collective agreements in force, to identify any contractual obligations in relation to new employees in the absence of the 30-day rule.  

If you have any questions about the changes, and how they could affect you or your business, please reach out to Anne Wilson, or Rebecca White for a confidential chat.  

Read our previous article for more information on the expected impact of the changes .

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