Amendments to the Employment Relations Act 2000 (the Act) that became law on 21 February 2026, will reshape the personal grievance landscape and the management of Independent Contractor agreements.
Below is a summary of the key changes:
1. Specified Contractor - Gateway Test
The Act introduces a gateway test for specified contractors. Contractors who meet specific criteria are automatically deemed genuine contractors, preventing retrospective reclassification as an employee.
A worker is classified as a specified contractor when:
- there is a written agreement that specifies that the worker is an Independent Contractor (or not an employee); and
- they are not restricted from performing work for another party
- the worker is:
- not required to work certain times or days or for a minimum period; or
- allowed to subcontract any work
- the business cannot terminate the arrangement if the worker does not accept an additional task.
- the worker had a reasonable opportunity to seek independent advice before entering into the arrangement.
If the worker does not meet the gateway criteria, then the Authority or the Courts will look at the true nature of the relationship, irrespective of what the worker has been classified as in a contract.
Misclassification of contractors can lead to hefty back-pay and legal risks. If a business hires someone as an independent contractor when the true nature of the relationship is that of employment, they may be held liable for extra costs including back payment of wages, leave entitlements and compensation if the engagement was terminated or changed without process.
Compliance with the new gateway test gives small businesses clearer confidence that their worker is an Independent Contractor and will not be later re-classified as an employee.
It is therefore important to ensure that your Independent Contractor agreements satisfy the gateway criteria.
2. Personal Grievance Remedies Tightened
The Act introduces changes regarding employee remedies in employment disputes, particularly when the employee is found to be at fault.
Key changes Include:
- Removing remedies for employees whose behaviour amounts to serious misconduct.
- Allowing remedy reductions of up to 100% where an employee contributed to the situation causing the personal grievance.
- Consideration must be given as to whether the employee's behaviour hindered the employer's ability to meet their fair and reasonable obligations.
- The tolerance for procedural error is increased – and will focus on whether any errors in the employer’s process resulted in the employee being treated unfairly.
These changes are a welcome relief to employers. However, it is important to not be complacent. The employer is still required to act reasonably and fairly in the circumstances – which means substantive and procedural requirements are still relevant and necessary.
3. Limits on Personal Grievance Claims for High Income Earners
The Act introduces an income threshold where employees earning above $200k per annum would generally not be able to raise an unjustified dismissal claim. However, employers and employees could still choose to opt back into these protections.
These changes could offer more flexibility when hiring for senior roles, potentially reducing the risk of costly and disruptive dismissal processes if a senior hire doesn't work out as planned.
Employees on existing employment agreements who meet the remuneration threshold will have up to 12-months to re-negotiate their agreements before the threshold for unjustified dismissal claims takes effect
It would be important to have clear, well-documented agreements if you choose to opt in or negotiate alternative arrangements. In addition, these employees will retain their rights to raise a personal grievance for unjustified discrimination or disadvantage. As such an employer must still deal with them fairly and reasonably during their employment.
4. Removal of the 30 day rule
The Act removes the requirement that the terms of a new employee’s employment agreement reflect the terms of a collective agreement for the first 30 days of employment.
The related employer’s obligations in respect of information about unions and the active choice to join a union form is also removed.
An employer will be required to inform an employee of the collective employment agreement and provide a copy, but the employee will no longer be subject to its terms unless they become a member of the union.
Empower your business today
Peninsula is here to help you navigate the potentially confusing definitions associated with employment. Our advice line is available day or night, so feel free to contact us whenever engaging new staff to ensure you are meeting your obligations.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.
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