The Personal Grievance Remedy Regime Has Changed: Now What?
The Employment Relations Amendment Act 2026, which came into force on 21 February 2026, has introduced some of the most dramatic changes to the Employment Relations Act since it came into force in 2000.
You may have seen articles that list the changes as follows:
Establishing a contractor gateway test that, if met, will deem a worker to be a contractor rather than an employee.
Employee’s earning $200,000 or above will no longer be able to raise a personal grievance for dismissal.
Employers are no longer required to apply Collective Agreement terms to non-union employees for the first 30 days of employment.
If an employee contributes to a personal grievance, they will no longer be entitled to reinstatement or compensation.
If an employee’s contribution to the personal grievance amounts to serious misconduct, then there will be no remedies available at all.
While many lawyers and employers understand (or infrequently need to consider) the contractor gateway test, collective agreements, or terminating employees earning over $200,000, the changes to the remedies available for personal grievances will impact all employers and employees, and have attracted significant debate and uncertainty across the employment sector.
Lawyers and employers alike are unsure as to how the Employment Relations Authority or Employment Court are likely to interpret and implement these new provisions.
In this insight, we critically analyse these amendments and provide some predictions as to how the Authority/Court may respond to them. In particular, we discuss some arguments that employees could raise to maximise the remedies available to them under the more restrictive legislative framework imposed under the amendment.
What are the changes to personal grievance remedies under the Amendment Act?
Under the old Act, once established that an employee had suffered a personal grievance, the Authority/Court could award one or more of the remedies set out in s 123. The Authority/Court were entitled to consider whether an employee had contributed towards the situation giving rise to the personal grievance when deciding on the remedies to be awarded but reductions of this nature tended to be relatively minimal.
However, the Amendment Act significantly restricts the ability of the Authority/Court to award remedies where an employee has engaged in serious misconduct or otherwise contributed to the situation giving rise to the personal grievance.
Firstly, the new s 123B provides that no remedies will be available if the employee’s actions in the situation giving rise to the personal grievance amounts to ‘serious misconduct’. Secondly, s 123C now states that the Authority/Court must not award remedies for reinstatement or compensation for humiliation, loss of dignity and injury to feelings or loss of any benefit where an action of the employee contributed to the situation that gave rise to the personal grievance.
Lastly, the amended s 124 establishes that remedies may be reduced by up to 100% when an employee has contributed towards the situation giving rise to the personal grievance. This directly overrules the Employment Court’s 2016 decision in Xtreme Dining Ltd v Dewar[1] which held that remedies should only be declined where an employee’s behaviour reaches the level of disgraceful, outrageous or particularly egregious.
Effectively these changes mean that where an employee has engaged in serious misconduct, they are not entitled to any remedy. Further, where an employee has not engaged in misconduct, but they have contributed to the situation that gave rise to the personal grievance, the only remedy available to them, if they raise a personal grievance, will be for reimbursement of lost wages (or other lost money under s 123(1)(b)).
Due to the dramatic impact these changes will have on employees’ ability to obtain remedies for personal grievances, identifying what kind of behaviour constitutes ‘serious misconduct’ or a ‘contribution to the situation’ will be an important challenge the Authority/Court will have to grapple with.
What actions may be considered ‘serious misconduct’?
We predict that during early cases implementing s 123B, the Authority/Court may refer to Government papers and reports produced during the Bill’s progression as guidance on what sorts of behaviour Parliament intended to be captured by the ‘serious misconduct’ exclusion.
In a briefing paper on the Amendment Bill, the Ministry for Business Innovation and Employment (MBIE) referred to the well-established definition of ‘serious misconduct’ that has been developed through case law.[2] Namely, serious misconduct is considered behaviour that “deeply impairs or is destructive of that basic confidence or trust that is an essential part of the employment relationship”.[3] They provided examples of behaviour that typically amounts to ‘serious misconduct’ such as violence, fraud, theft, dishonesty and drunk/disorderly behaviour.[4]
Brooke van Velden, the Minister responsible for the amendments, has similarly referred to these definitions and examples in her addresses. In one Cabinet proposal, she went further in saying that even behaviour that amounts to misconduct, but is not serious enough to justify dismissal, should also be captured by the now s 123B exclusion.[5]
Therefore, it seems that Parliament has intended to uphold the definition of what constitutes ‘serious misconduct’ as currently established in case law. This part of the Amendment Act only targets the remedies available after an employee’s behaviour is found to amount to serious misconduct.
Yet there is a possibility that to avoid unjust outcomes, and prevent employees being caught by the statutory bar that would deny them any meaningful remedies, the Authority/Courts could attempt to depart from or modify this current definition of serious misconduct.
Instead, the Authority/Court may raise the threshold required for behaviour to amount to “serious misconduct”, considering the significant consequences this determination now has on employees’ access to remedies. This is particularly likely due to the current Chief Justice of the Employment Court’s tendency to favour pro-employee results, with the Uber Case[6] being a prime example of this stance.
What actions may be considered a ‘contribution to the situation’?
An even more challenging question posed by the amendments is what behaviour will be considered as having contributed to the situation giving rise to the personal grievance, excluding the availability of reinstatement or compensatory remedies under the new s 123C. Again, we suggest that the Authority/Court may turn to supplementary Parliamentary material to ascertain Parliament’s intended application of this new provision.
In van Velden’s proposal to the Cabinet Economic Policy Committee, when explaining what behaviour she proposed to fall within the ‘contribution to the situation’ exclusion, van Velden said that this was to be a “lower threshold” than serious misconduct.[7]
She also referred to case examples to illustrate the kinds of behaviour that should fall within this exclusion. In one example, an account manager was dismissed for sending emails to a customer that potentially exposed the company to being fined by the Commerce Commission for being anti-competitive. In this case, the employee’s remedies were reduced by 10 per cent to account for their contribution to the situation.[8]
In a media statement on 4 December 2024, van Velden further said that a ‘contribution to the situation’ could range from “minor behaviours such as unproductive behaviour, repeated instances of lateness, misuse of company resources or under-performance, to more serious behaviours such as violence, theft, or fraud.”[9]
Like when defining ‘serious misconduct’, MBIE has recognised that the principles, tests and thresholds that the Authority/Courts use to determine contributory behaviour are well established in case law in the context of remedy reductions.[10] They refer to Maddigan v Director-General of Conservation[11] which summarises factors that the Authority must consider when determining if an employee has contributed to the situation giving rise to the personal grievance. These are:[12]
(a) whether the employee’s alleged contributory conduct was culpable and blameworthy;
(b) whether the conduct created or contributed to the situation;
(c) what is a fair assessment of the extent of contribution; and
(d) if the reduction should be applied across all or some of the remedies.
Therefore, the current position is that for an employee’s contributory behaviour to require a reduction in remedies for a personal grievance, it must not only be causative of the outcome, but also blameworthy.
We foresee that the Authority/Court would uphold this requirement under the Amendment Act. Therefore, to trigger s 123C, an employee’s contribution would need to be blameworthy and not simply accidental or innocent. This higher threshold would align ‘contributory behaviour’ more closely with ‘serious misconduct’. While not expressly required by the Act, such an interpretation would preserve principles of natural justice and would align with the Authority/Court’s current pro-employee approach.
How do sections 123C and 124 related to one another?
Another potential challenge, and indeed opportunity, arises from the interplay between the new s 123C and the existing s 124. Both sections now separately prescribe how remedies will be determined where contributory behaviour of the employee is at play.
There are slight discrepancies in the wording between these two sections. Section 123C states that the Authority/Court must not provide remedies under ss 123(1)(a) or (c) if the Authority/Court determines that “an action of the employee contributed to the situation that gave rise to the personal grievance” (emphasis added).
In comparison, s 124 provides that in determining the nature and extent of remedies to be provided in respect of a personal grievance, the Authority/Court must consider the extent to which “the actions of the employee contributed towards the situation that gave rise to the personal grievance” (emphasis added).
As indicated by our emphasis, there are two key differences between these provisions. While arguably these could be a legislative oversight, we propose that there are valid grounds to argue that the discrepancies are purposeful. This aligns with the accepted presumption that Parliament deliberately chooses the words in legislation to achieve a particular legislative purpose. This presumption was affirmed in Wilson & Horton Ltd v Commissioner of Inland Revenue when considering the difference between the words “for” and “to” in s 11(2)(e) of the Goods and Services Tax Act 1985.[13]
Therefore, an employee could argue that if their employer cannot point to one identifiable, blameworthy “action” of the employee that had a clear causative effect on the situation giving rise to the personal grievance, s 123C does not apply. Instead, if their “actions” or behaviour contributed to the situation more generally, the employee may be entitled to all remedies available under s 123, albeit that these may be reduced by virtue of s 124.
Secondly, an employee could argue that “contributed to the situation” in s 123C requires that the employer satisfy a higher threshold of causation than behaviour that “contributed towards” the situation, as provided in s 124. “Contribute to” is defined in the Oxford Dictionary as to “help to cause or bring about”. This presents a need for some direct causative impact of an action on a certain, identifiable outcome.
However, “towards” is defined as “in the direction of” or “in relation to”. It logically follows that “contribute towards” merely requires that actions have an impact on a situation more broadly, as opposed to bringing about specific outcome.
Considered together, these discrepancies arguably suggest that Parliament intend that a higher threshold of causation be required to satisfy s 123C, requiring a direct causal nexus between an identifiable action of the employee and the situation giving rise to the personal grievance. Due to the risk that, if interpreted liberally, s 123C could significantly impede upon principles of natural justice, the Authority/Courts may interpret this causation requirement strictly.
Therefore, the Authority/Courts could find that where no clear causal nexus exists, but an employee’s behaviour may have contributed more generally to the overall situation giving rise to the personal grievance, s 124 could then apply. As such, the employee may still be entitled to all remedies under s 123, and these would only potentially be reduced to account for their contribution.
Whether the Authority/Court would accept these arguments is unknown. However, we predict that the Authority/Court will be relatively receptive to considering any arguments of this nature that protect employees’ rights to remedies to the greatest extent possible within the bounds of the new amendments.
Do the amendments apply to personal grievances raised prior to the Acts enforcement?
There has been some discussion among lawyers and employers regarding whether the new provisions governing personal grievances remedies may apply to grievances raised prior to the commencement of the Amendment Act. Unlike the new sections involving the classification of independent contractors, sections 123B or 123C do not contain any transitional provisions.
However, case law addressing similar issues that arose following amendments to the Act in 2011 offers some clarity. The leading case is Allen v C3 Ltd [2012] NZEmpC 124. Here, the employee was dismissed for misconduct on 18 March 2011 but amendments to sections governing employee’s reinstatement rights came into effect on 1 April 2011. Drawing on the constitutional presumption that legislation does not have retrospective effect, as reflected in what is now sections 32 and 33 of the Legislation Act 2019, the Employment Court held the amended provisions did not apply.[14]
This was because the plaintiff’s right to reinstatement arose at the time the unjustified dismissal occurred. As this right or interest existed prior to the amendments coming into effect, the equivalent provision to what is now s 33 of the Legislation Act applied. Therefore, the applicable test for reinstatement was what existed at the time that Mr Allen was dismissed.
Therefore, we predict that the Courts will adopt the approach taken in Allen for determining whether the amended provisions governing personal grievance remedies apply. Namely, the relevant date dictating whether the new remedy regime applies will likely be the date that the dismissal or disadvantage occurred, as this is when the employee’s right or interest in remedies arises. The relevant date will unlikely be when the employee raised a personal grievance.
Therefore, if the employee is dismissed or suffers a disadvantage before 21 February 2026, their right or interest in remedies arose while the old provisions were in force. This triggers s 33 of the Legislation Act 2017, meaning that the employee’s entitlement to remedies is not affected by the new amendments.
While the date of dismissal will typically be straightforward to identify, it is often more challenging to identify exactly when a disadvantage occurs. Therefore, lawyers could potentially use this to employees’ advantage, by identifying the date that a disadvantage first arose as being prior to the amendments coming into effect. This could potentially mean that the employee would not be captured by the stricter remedy exclusions.
Conclusion
We must caveat that these comments are not law and are merely predictions of what approach the Courts could take. It is impossible to predict with any great certainty how the Courts are going to interpret and apply these new amendments. Instead, we must wait in anticipation for cases to be brought before the Authority/Court that require them to grapple with and implement these new amendments.
We welcome your thoughts and comments on this insight. We value keeping these conversations live, ensuring that practitioners can guide the Authority/Court as precedents begin to develop.
[1] Xtreme Dining t/a Think Steel v Dewar [2016] NZEmpC 136.
[2] Ministry for Business Innovation and Employment Briefing: Decisions on eligibility for remedies for personal grievances (24 September 2024) at 6.
[3] Eagle Airways Ltd v Lang EmpC Auckland AEC5/95, 20 February 1995.
[4] MBIE, above n 2, at 6.
[5] Brooke van Velden Strengthening consideration and accountability for the employee’s behaviour in the personal grievance process (20 November 2024) at 5.
[6] E Tū Incorporated v Rasier Operations Bv [2022] NZEmpC 192 [25 October 2022].
[7] van Velden, above n 5, at 6.
[8] van Velden, above n 5, at 6.
[9] Broke van Velden “Removing rewards for poor employee behaviour” (media release, 4 December 2024).
[10] Ministry for Business Innovation and Employment Regulatory Impact Statement: Strengthening consideration and accountability for employees’ behaviour in the personal grievance process (12 November 2024) at 10.
[11] Maddigan v Director-General of Conservation [2019] NZEmpC 190.
[12] At [73].
[13] Wilson & Horton Ltd v Commissioner of Inland Revenue [1996] 1 NZLR 26.
[14] See Allen v C3 Ltd [2012] NZEmpC 124 at [60]-[87].
