Employment Relations Amendment Bill Clears First Hurdle in NZ Parliament

In a key legislative development for New Zealand’s labour laws, the Employment Relations Amendment Bill has passed its first reading in Parliament, signaling progress on the Government’s agenda to streamline employment practices, reduce compliance burdens, and provide clarity for contracting arrangements. Minister for Workplace Relations and Safety Brooke van Velden hailed the successful first reading as a “major milestone” in creating a more flexible and confident employment environment for both businesses and workers.

The Bill, a key deliverable under the ACT–National Coalition Agreement, now moves to the Education and Workforce Select Committee, where it will undergo public scrutiny and potential refinement through the submission process.

Key Reform Areas Addressed by the Bill

The proposed legislation is designed to modernize and clarify elements of employment relations law that many employers and legal experts have long described as uncertain, burdensome, or out of step with modern work arrangements.

Minister van Velden outlined three major areas of reform:

1. Clarifying the Distinction Between Employees and Contractors One of the most significant elements of the Bill is the introduction of a “gateway test” to better distinguish between employees and independent contractors. This is intended to give greater legal certainty to both businesses and workers about their status and associated rights and obligations.

   Misclassification of employees as contractors has led to numerous legal disputes in recent years, particularly in sectors like gig work, construction, and media. The test aims to address these ambiguities while preserving genuine contracting flexibility.

2. Simplifying the Personal Grievance Process The Bill introduces an income threshold of $180,000, above which employees would not be able to pursue unjustified dismissal claims under the personal grievance provisions of the Employment Relations Act.

   The Government argues this will reduce unnecessary litigation involving highly paid employees with greater bargaining power, freeing up resources for lower-income and more vulnerable workers.

3. Removing the 30-Day Rule The Bill proposes the removal of the 30-day rule, which currently requires new employees to be employed under the terms of a collective agreement (if one exists) for the first 30 days of employment.

   Removing this rule would allow immediate negotiation of mutually agreed employment terms from day one, which supporters say would increase flexibility and reduce administrative overhead—especially for small and medium-sized enterprises.

“This Bill reflects the Government’s commitment to supporting New Zealand businesses and creating more and better opportunities for workers,” said Minister van Velden.

Encouraging Public Participation

With the Bill now under Select Committee review, Minister van Velden emphasized the importance of public submissions in shaping the final legislation. She specifically invited feedback on:

• The practicality and coverage of the gateway test criteria for determining contractor status

• The appropriateness of the $180,000 income threshold for limiting access to personal grievance claims

• The likely impact of removing the 30-day rule on both employers and workers

“I encourage all interested New Zealanders to have their say on the Bill. I see the Select Committee process as an important way of strengthening the final Bill and making sure it works for a wide variety of working relationships and situations,” van Velden said.

Submissions to the Education and Workforce Select Committee are expected to open in the coming weeks, with a report back deadline likely by late 2025.

Business Community Support, Union Concerns

While many in the business community have welcomed the Bill as a long-awaited move to increase employment certainty and workplace flexibility, trade unions and employment rights advocates have expressed concerns about the potential erosion of worker protections, especially for high-income earners and those in non-traditional work arrangements.

Critics argue that introducing an income threshold could lead to inequitable treatment of workers, and that without clear checks, the reclassification rules could be misused to limit access to employee rights and benefits.

Broader Labour Market Context

The Bill comes amid shifting dynamics in New Zealand’s workforce, with gig economy platforms, remote freelance work, and non-standard employment arrangements becoming increasingly common. According to the Ministry of Business, Innovation and Employment (MBIE), contractor numbers have grown steadily, especially in technology, logistics, and creative industries.

The Government says the new legislation is a pragmatic response to this evolution, ensuring the law stays fit for purpose while still offering core protections to employees and vulnerable workers.

Looking Ahead

If passed, the Employment Relations Amendment Bill would represent one of the most significant overhauls of New Zealand’s employment law in recent years. The Government aims to have the final legislation passed and in effect by mid to late 2026, depending on the outcome of the Select Committee process and subsequent parliamentary readings.

Minister van Velden remains optimistic that the Bill will receive wide-ranging input and emerge as a balanced piece of legislation that gives both employers and workers confidence, clarity, and fairness in navigating their working relationships.