Inviting the very uncertainty and litigation it promised to quell
New Zealand now lives under the Employment Relations Amendment Act 2026.
The Bill passed its third reading on 17 February and became law on 19 February with Royal Assent. That dry procedural milestone masks a profound shift: Parliament has recalibrated the employment system away from ex‑post fairness, inviting the very uncertainty and litigation it promised to quell.
Ministers have trumpeted a “great day for the labour market,” promising certainty through a contractor gateway test, tighter limits on remedies where employee conduct is alleged, a $200,000 total‑remuneration threshold that removes unjustified dismissal rights unless opted back in, and the removal of the 30‑day collective alignment rule for new hires.
But each change contains fault lines that lawyers, unions, and affected workers will test.
The changes display a naivety about the realities of New Zealand employment law. The Government’s own communications emphasise clarity and confidence; the legal community’s early analysis reads more like a litigation roadmap.
Challenge #1: The gateway test vs the “real nature” of the relationship
The Act creates a new categorical status “specified contractor” when all listed criteria are satisfied (the contract states the worker is a contractor, freedom to work for others, no required minimum hours or prohibition on subcontracting, no termination for refusing additional work, and a reasonable opportunity to take independent advice).
If even one element is missing, status reverts to the traditional “real nature” test.
On paper this appears neat; in practice, it makes each criterion a potential point of contest.
For example, is there genuine freedom to work elsewhere when rosters, exclusivity expectations, or retaliation risks exist? Is the opportunity to obtain independent advice real or merely nominal? Do operational realities contradict the written terms?
These are fact‑heavy inquiries that will play out in the decision‑making forums.
Courts have long used the “real nature” test to pierce contractual labels, a doctrine that recently underpinned major platform‑work litigation. Legislating a formal gateway that privileges written terms invites constitutional criticism for undermining the rule of law: it seeks to curb judicial discretion by front‑loading status designations while providing only a narrow backstop to the common law.
Expect targeted challenges arguing that, in substance, the gateway criteria are not met thereby reinstating the real‑nature analysis and that sham contracting persists beneath compliant wording.
Challenge #2: Remedies and the rise of “behaviour‑first” dismissal framing
The Act’s new sections 123B–123C transform remedial discretion.
If an employee’s contributing behaviour amounts to serious misconduct, no remedies are available.
If the contribution falls short of serious misconduct, reinstatement and compensation are off the table, and any remaining remedies may be reduced by up to 100%.
Under the old section 124, the ERA already had an obligation to reduce remedies including to zero but only after weighing context and proportionality.
The new rules convert what was a balancing exercise into bright‑line exclusions. This creates a powerful incentive for employers to frame disputes as “behavioural,” and for employees to litigate the characterisation.
Practitioners are already noting that these provisions tilt contested cases toward employer‑driven narratives and will alter how pleadings are drafted, how evidence is marshalled, and how interim relief is sought.
In effect, the label becomes determinative clever wordsmithing, not necessarily aligned with the factual matrix that section 103A requires.
The Michelle Knuth case illustrates this: the ERA’s interim reinstatement in 2024 relied on contextual scrutiny (CCTV, de‑escalation conduct, alternatives to dismissal). Under the new Act, that scrutiny is constrained once an employer elevates conduct to “serious misconduct.”
Expect robust evidential disputes at the threshold; Was it really “serious”? Or a contested incident requiring a proportional response?
The Act merely shifts the point of litigation.
Challenge #3: A class exclusion from unjustified‑dismissal rights, and disputes over “total remuneration”
Employees earning $200,000+ in total remuneration (not just base salary) lose the right to bring unjustified‑dismissal personal grievances unless they opt back in by written agreement. Existing employees have 12 months to negotiate.
Two obvious litigation streams follow:
First, classification disputes over what counts as “total remuneration”: bonuses, commissions, equity, allowances, irregular payments, and timing issues.
Second, good‑faith disputes over the transition process; Were employees properly informed? Were negotiations genuine? Were staff pressured to forgo rights?
Section 3 of the Act still requires consideration of the inherent inequality of power a provision often underrated but critical.
Another fault line is jurisdictional. The exclusion applies only to unjustified dismissal claims (and dismissal‑related disadvantage), not to discrimination or harassment, Holidays Act claims, Minimum Wage Act claims, Health and Safety at Work Act claims, or contractual causes of action.
Where dismissal PGs are barred, expect exploration of alternative statutory and common‑law routes where the facts permit.
Challenge #4: Collective erosion and intra‑workplace inequality
By abolishing the 30‑day rule, the Act allows new hires to start on individual terms immediately, even where a collective agreement covers the role. Only reduced union‑information obligations remain.
Government guidance emphasises “freedom of choice.”
In reality, the change exposes new workers often the least empowered to inferior terms and creates disparities within teams. Unions will seek to remedy this at the bargaining table or, where misrepresentation or bad faith is alleged, through proceedings.
Early‑tenure protection has been diluted where it matters most.
Expect more litigation, not less.
Across all fronts, the profession’s consensus is striking: the Act promises certainty but plants new ambiguities.
Status fights will centre on whether each gateway criterion is genuine in practice.
Dismissal cases will pivot on the characterisation of conduct.
High‑earner disputes will proliferate over remuneration definitions, opt‑ins, and good‑faith processes.
What can parties do now?
Workers and unions can blunt the Act’s impact by:
insisting on opt‑in clauses for high earners during the 12‑month window,
building factual records early to rebut “serious misconduct” labels,
testing the authenticity of each gateway criterion (freedom to work elsewhere, non‑retaliation, real opportunity for legal advice).
Government commencement guidance makes clear these provisions take effect immediately. Early discipline around evidence, process, and bargaining will be crucial. Certainty for employers still requires aligning reality with the contract—overreach will be tested and found wanting.
The deeper concern is constitutional.
For 25 years, the ERA and courts have corrected unfairness by looking past labels to the real relationship and by tailoring remedies to context. Section 103A still requires consideration of employer actions in their “circumstances.”
By elevating form at the gateway and curtailing discretion at remedy, Parliament has narrowed the lanes through which justice can travel.
But that does not extinguish fairness, reasonableness, or equity, it simply relocates the battle:
to status skirmishes over freedoms and constraints,
to definitional warfare over “total remuneration,”
and to threshold fights over whether human behaviour meets a bright‑line label.
Employment relationships are not binary. Dispute and contest are the heart of the system. Attempts to eliminate them demonstrate an unhelpful naivety about a legal framework that has existed since 1894. Fair inter partes bargaining and dispute resolution are the cornerstones of a productive employment relationship; they do not belong to prescription.
In the end, the courts will be asked a simple question, dressed in complex facts:
Do written words describe the truth of how we work or only what the powerful prefer it to be?
On that answer will turn not just the fortunes of a few test cases, but the everyday dignity of thousands whose only real protection has always been the law’s willingness to look past the paper to seek out truth and fairness. We believe substance will prevail.
