1. The New Contractor "Gateway Test"

This is the biggest change in the Act. Previously, determining whether someone was an employee or a contractor meant examining the "real nature" of the relationship, regardless of what the contract said. It was costly, unpredictable, and frequently litigated.

The new law creates a new category called a "specified contractor". If a working arrangement meets the gateway test, the person is legally a contractor and cannot later challenge that status through the Employment Relations Authority or the Employment Court.

To qualify as a specified contractor, the arrangement must include:

• A written agreement stating the worker is an independent contractor
• Freedom to work for other clients (except while performing specific work)
• Flexibility around hours, or the ability to subcontract the work
• No termination for declining additional work
• A reasonable opportunity for the worker to seek independent legal advice before signing

What this means for employers: Greater certainty when engaging contractors. If your arrangement meets all five criteria, the litigation risk that has plagued contractor relationships is significantly reduced.

What this means for workers: If you're signing a contract with these terms, you're locked in as a contractor. Read carefully, and get advice before you sign.

Note: if any one of the five criteria isn't met, the old "real nature of the relationship" test still applies.

2. The $200,000 High-Income Threshold

Employees earning over $200,000 per year can no longer bring a personal grievance claim for unjustified dismissal, unless their employment agreement expressly opts back into that right.

Key details to know:

• The $200,000 threshold is based on base salary only, it excludes bonuses, overtime, KiwiSaver contributions, and owner-related benefits
• The threshold will be reviewed annually in line with average weekly earnings
• The exclusion only covers dismissal-related grievances, discrimination claims are unaffected
• For existing high-earning employees, this exclusion doesn't apply for the first 12 months unless both parties agree otherwise

What this means for employers: Reduced exposure when parting ways with senior staff. But this isn't a green light to act carelessly, process still matters, and other claims (like discrimination) remain fully available.

What this means for employees: If you're in this bracket, review your employment agreement now. You may want to negotiate to retain your personal grievance rights before the 12-month transitional period expires.

3. Personal Grievance Reforms, Contributory Conduct

The Act tightens the personal grievance process where an employee's own behaviour contributed to the situation.

The new rules:

• If an employee's serious misconduct contributed to the grievance, they lose the right to any remedy
• If their conduct was problematic but fell short of serious misconduct, reinstatement and compensation for emotional harm or lost benefits are off the table
• Financial compensation for lost wages may still be considered, but courts have full discretion to reduce or remove it

What this means for employers: Stronger protection where the employee's behaviour was a genuine factor. Document everything as this is your evidence base.

What this means for employees: The bar to a successful personal grievance has risen. If your own conduct was an issue, the remedies available to you have narrowed considerably.

4. The Justification Test, Procedural Errors

A long-standing frustration for employers: following the right process imperfectly could undo an otherwise justified dismissal. The new Act addresses this.

The changes:

• Procedural mistakes alone will not render a dismissal unjustified, unless those errors caused actual unfair treatment
• The ERA and Employment Court can now consider whether an employee obstructed the employer's process when assessing fairness

What this means in practice: You still need to follow a fair process. But a technical slip-up is less likely to unravel an otherwise sound decision. Substantive justification now carries more weight.

5. Trial Period Protections Strengthened

Employees dismissed under a valid trial period are now barred from bringing a personal grievance for unjustified dismissal or unjustified disadvantage.

What this means for employers: Trial periods are a more reliable tool than they were before, but only if you've followed the rules to the letter. One misstep and the protection falls away. If you're using trial periods, now is a good time to review your template agreements.

6. The 30 Day Rule is Gone

The rule requiring new employees' individual agreements to mirror the terms of the relevant collective agreement for the first 30 days of employment has been repealed.

Also repealed: the obligation for employers to share new employee information with unions unless the employee objects.

What this means for employers: More flexibility in how you structure new hires' terms from day one, without being bound to collective agreement settings they may not be covered by.

The Bigger Picture

The Act is deliberately employer-focused. Its stated purpose is to increase labour market flexibility, reduce compliance costs, and create a more balanced grievance process.

Not everyone agrees it achieves that balance. Critics argue the changes tip power further toward employers and weaken protections for workers, particularly those in lower-bargaining-power positions.

What's clear is this: the rules have changed. Contracts that made sense last year may need updating. Processes that worked before may need reviewing.

Our advice for both employers and employees:

• Review existing employment agreements, especially for contractors and high earners
• Update contractor agreements to ensure they meet (or clearly don't meet) the gateway test
• Don't assume trial periods are automatically bulletproof, check your template language
• Get legal advice if you're unsure. The stakes on both sides are real.

The team at Alexander James works across the NZ job and hiring market every day. If you want to understand what these changes mean for your hiring strategy or workforce structure, get in touch.