December 2025
The Select Committee has reported on the Bill, proposing some changes.
The Minister has published her Cabinet paper setting out what she will ask Parliament to adopt.
The major matters in the Bill are the law on who is a contractor rather than an employee, and the proposal that persons on higher incomes ($200,000 and above) will not be able to raise a personal grievance claim alleging unjustified dismissal.
In its new form, the Bill has importance for employers, employees and independent contractors.
Our summary is based on the Minister’s statements – which may change. All clients should review these points and if they may affect you, read the detailed report, paper, and revised Bill – or discuss these matters with us.
Who is a contractor?
The Bill proposes a “gateway” test. If a worker meets the “gateway” test, they can be a contractor. It is intended to be useful for some but not all arrangements for contractors.
There are four “gateway” criteria, and before entering into a contract a worker must be given reasonable opportunity to seek independent advice.
The criteria to be a contractor are that there must be a written intention to be one; the worker must not be restricted from working for others; the worker is not required to be available to work certain times or days or for a minimum period, or is able to sub-contract the work; and the business does not terminate the arrangement for the contractor not accepting an additional task.
If the criteria ae not met, then whether the worker is a contractor will be determined using the existing “real nature of the relationship test” in section 6 of the Act. The Minister has said:
- “Workers will still be considered a contractor if that is their preference, regardless of whether they would otherwise meet the gateway test, as the gateway or real nature of the relationship tests are only applied when a worker challenges their employment status. [Cabinet paper para 17].
The claimed advantage of this change is to simplify and clarify who is, or can be, a contractor. We are yet to see whether this will actually happen. In our opinion, both employers and those who want to work as contractors will need to give increased attention to these detailed changes.
Personal grievance claims for unjustified dismissal
At present any employee can bring a personal grievance claim for unjustified dismissal.
The Bill assumes that persons on higher incomes have strong independent bargaining power and do not need to have unjustified dismissal personal grievance rights.
That is not our view, based on experience. Some highly paid employees have few other options for their skills; many are highly paid for expertise which has nothing to do with bargaining skills. Working for both employers and employees, we have found the personal grievance procedures to be a valuable, speedy and economical way of resolving conflicts (whether the employee stays or goes).
Of interest, there was a wide range of views among employer organisations in the submissions to the select committee. Some argued that the exclusion figure should be set much higher (for example the EMA wanted an annual income test of over $240,000); other employer organisations wanted a test that would apply only to individuals with genuine contractual and financial independence; some (including the meat industry) opposed the proposal.
The Minister is going ahead, and now proposes changes which will require detailed income assessments to be made before an employer acts. She says the figure (now to be $200,000 per year) will be based on PAYE income in the previous 12 months plus other financial benefits such as employee share and bonus schemes.
She has told Cabinet:
- “I propose that this is calculated on the pay period immediately before an employee is notified of termination.”
She has told Cabinet:
- “I expect that if employers have such concerns, this can be addressed by employers and employees agreeing to contract back into personal grievances provisions (which is an option that remains available).”
We consider several significant effects of the Bill have been overlooked:
- unjustified dismissal personal grievances can be for unjustified redundancies, so employees on higher incomes would not be able to challenge a redundancy;
- the Bill removes from these employees their rights to be consulted with in a restructuring situation or to have an investigation before being dismissed.
In most situations, our advice to both employers and employees would be to retain the right for all employees to use the personal grievance procedure. True, sometimes (but not often in our experience) this can be used unreasonably. But the Minister does not explain how not having it available would be better.
Other changes in the Bill
We will discuss the other changes in the Bill early next year.
PENELOPE RYDER-LEWIS and CAROLYN HEATON
prl@btlaw.co.nz carolyn.heaton@btlaw.co.nz
Ph: (021)477297 Ph: (029)4958908