2025 promises an array of changes to employment laws

As we near the end of 2024, an array of upcoming changes to the Employment Relations Act 2000 (ERA) are expected to be enacted in 2025. These include:

• Changes to the manner in which remedies will be assessed in personal grievance claims;
• The introduction of an income threshold for unjustified dismissal personal grievances;
• Allowing an employer to make an offer to an employee for the purposes of reaching agreement to terminate an employment relationship; and
• The ability for employers to make pay deductions in response to partial strikes.

Consistent with the prior amendments, these proposed changes lean further in favour of commercial interests and employer protections, and reflect an alignment with the coalition Government's ongoing employment law strategy.

 

How employee remedies will be assessed in personal grievance claims

Changes are proposed to the manner in which remedies will be assessed in personal grievance claims. These changes will be introduced in 2025 in an amendment to the ERA.

The update will mean more consideration is given to an employee's behaviour when awarding remedies as a result of a successful personal grievance, including:

• Removing remedies for employees where their behaviour amounts to serious misconduct;
• Removing eligibility for an employee to be reinstated into a role, and compensation for hurt and humiliation, when the employee's behaviour has contributed to their dismissal;
• Allowing remedy reductions of up to 100% where an employee has contributed to the situation which gave rise to the personal grievance; and
• Requiring the Employment Relations Authority and Court to consider if the employee's behaviour obstructed the employer's ability to meet their fair and reasonable obligations.

These changes aim to strike a better balance and increase certainty for employers.

 

Introduction of income threshold for raising an unjustified dismissal personal grievance

Another upcoming change looks to introduce an income threshold of NZD180,000 per annum, above which unjustified dismissal personal grievances cannot be pursued. This change has been proposed to in 2025 through an amendment to the ERA.

The change is not proposed to exclude an employee from raising other types of personal grievances, such as an unjustified disadvantage.

The income threshold will be adjusted annually to mirror increases to average weekly earnings, and refers to regular base salary, not inclusive of other income such as incentive payments or other benefits.

The proposed changes appear in some respects to be similar to the Australian equivalent where the high income threshold is AUD175,000 and is adjusted annually.

 

Protected negotiations

In November 2024, the Employment Relations (Termination of Employment by Agreement) Amendment Bill was drawn from the members' ballot and introduced into Parliament.

This Bill allows for an employer to seek to terminate the employment relationship with mutual consent, enabling the employer to request an employee execute a settlement agreement in return for specific compensation in full and final settlement of any cause of action arising out of the employment relationship. The intent of the Bill is to allow such conversations and negotiations to occur on a basis that does not give rise to a personal grievance.

To date New Zealand employers have been relying on without prejudice conversations to discuss mutually agreed terminations, but these inherently carry an element of risk. The Bill reflects, and is largely consistent with, the commonly used practice of 'protected conversations' in the United Kingdom. New Zealand's current system does not provide absolute protection in this context and therefore this Bill would provide greater certainty over the privileged nature of those discussions.

 

Pay deductions for partial strikes

The Employment Relations (Pay Deductions for Partial Strikes) Amendment Bill was introduced in December 2024. This Bill allows employers to make pay deductions in response to partial strikes. A partial strike is industrial action where an employee will, for example, turn up to work but refuses to partake in key parts of the job that form their normal duties instead of wholly discontinuing their employment during a strike.

The Bill will largely reintroduce the provisions that were previously in place under the ERA that were removed in 2018.

Under the current provisions, an employer is unable to make deductions from an employee's pay when they are engaged in a partial strike unless they suspend the employee or issue a lockout notice. This Bill will allow employers to:

• Reduce an employee's pay by a proportionate amount (calculated in accordance with a specified method based on identifying the work the employee will not be performing due to the strike); or
• Make a deduction of 10% of the salary or wages payable to the employee for the period of the partial strike.

An employer will be required to provide written notification to the employees that the employer will be reducing their pay prior to the deduction being made.

 

Looking to 2025

In addition to the above announcements, 2025 is likely to see an array of changes impacting employment law in New Zealand, including those set out above, the introduction of the new 'Gateway Test' under the ERA and an amendment to the Holidays Act 2003 being made public early in the year. The direction of such updates upholds the coalition Government's employment law strategy.