The Government has passed changes to the Employment Relations Act that significantly affect how unjustified dismissal claims and personal grievance remedies work in New Zealand. These changes are particularly important for employers because they alter both who can bring certain claims and what an employer may be required to pay if a grievance succeeds.
The changes are expected to take effect very soon. In most cases, new employment laws apply shortly after they are formally signed off by the Government, often within days. Employers should assume the new rules will apply to dismissals and personal grievance situations that arise from that point onward, rather than expecting a long transition period.
One of the most significant changes is the introduction of an income threshold for unjustified dismissal claims. Under the new law, employees earning more than $200,000 per year will no longer be able to bring a personal grievance for unjustified dismissal unless their employment agreement specifically allows for it.
In practical terms, this means higher earning employees cannot automatically challenge a dismissal through the Employment Relations Authority or Employment Court simply on the basis that it was unfair. For employers, this reduces exposure when ending senior or highly paid roles, provided the employment agreement does not preserve unjustified dismissal rights. Other personal grievances such as discrimination or disadvantage may still be available, but unjustified dismissal on its own will no longer apply above the income threshold.
This change places much greater importance on employment agreement drafting. If an employer wishes to retain greater certainty when ending employment for higher paid roles, the agreement must be carefully worded. If dismissal protections are offered in the agreement, those protections will still apply.
The second major change affects what happens when an employee succeeds with a personal grievance. The law now allows decision makers to place greater weight on the employee’s own conduct when deciding what remedies should be awarded.
Where an employee has engaged in serious misconduct such as violence, dishonesty, or other significant wrongdoing, compensation may be reduced or not awarded at all. Even where the conduct is less severe, remedies can still be reduced if the employee’s behaviour contributed to the situation that led to the grievance.
For employers, this change reinforces the importance of addressing conduct issues early and keeping clear records. Employers must still follow fair and reasonable processes, but there is now greater recognition that employees should not benefit where their own actions have significantly caused the problem.
These changes do not remove the need for good process or careful decision making. Employers must still act in good faith, investigate issues properly, and give employees an opportunity to respond. What has changed is that the law now provides clearer limits around unjustified dismissal claims for higher earners and allows remedies to better reflect employee conduct.
Now is a good time for employers to review employment agreements for senior roles and ensure disciplinary processes and documentation are up to date. The changes can reduce risk, but only when applied carefully and with the right advice.
If you are unsure how these changes apply to your business, or whether your employment agreements and processes are set up to manage risk under the new law, now is the right time to get advice. Reviewing contracts and disciplinary practices early can prevent costly issues later.
If you would like support reviewing employment agreements, updating templates, or talking through a specific situation, feel free to get in touch for practical, employer focused advice.
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