The 2023 National - Act Coalition Agreement promised a raft of employment reforms aimed at making business easier for employers. Some of these changes were implemented in the first 100 days of the Government and following last weeks’ proposal to remove unjustified dismissal protections for high earning employees, the Minister for Workplace Relations, Brooke van Velden has now given us a peek at what else we can expect to see in the second tranche of changes coming in early 2025. 

At a speech to the Hutt Valley Chamber of Commerce last week, the Minister didn’t shy away from this Government’s view that personal grievance settings have not struck an even balance between employer and employee. The announcement proposes three significant law changes in order to strike a better balance and increase certainty for employers: 

• a revamp to how contributory conduct by employees will affect remedies 
• a removal of reinstatement and hurt and humiliation compensation for some employees 
• an increased threshold for when procedural defects will render a dismissal unjustified

Contribution – sharing the blame 

First, the policy seeks to reduce the amount employees can recover from an employer in a personal grievance where the employee has behaved improperly. At present, the Court and the Authority can only reduce an employee’s remedies if they have engaged in behaviour which is both blameworthy and has also created or contributed to the personal grievance. That threshold looks to be extended to include general poor behaviour and performance. The message from the Minister is that employees who have engaged in inappropriate behaviour should not be rewarded with financial remedies. 

This will also be accompanied by a reintroduction of the ability for the Authority and the Court to reduce remedies by 100% (something removed by the Employment Court in 2016). Prior to this change 100% reductions were rare, however that looks set to change with the introduction of a mandatory 100% reduction in remedies where an employee has been found to have engaged in serious misconduct. This reflects the Government’s desire to get tougher on behaviour which erodes the basic trust and confidence essential to employment relationships. 

While 100% reductions will be open to the Court in all cases, the mandatory 100% reduction in instances of serious misconduct is particularly consequential – employers (particularly those with a high risk appetite) may opt not to follow any formal process at all when dismissing employees for serious misconduct and rely on the risk of a 100% remedies reduction to dissuade any litigation. This will of course hinge on how the court defines the scope of these new provisions.

Reinstatement 

With a new National-Act government, many employment practitioners expected a change to the remedy of reinstatement. The most obvious change would be the removal of its status as the ‘primary remedy.’ However, the Minister has instead proposed to remove reinstatement as an available remedy where the employee has engaged in poor behaviour or poor performance. 

By incorporating contribution as a bar to reinstatement. Employers will have more confidence that even where the grounds for dismissal are dubious, the risk of reinstatement is low. It will be interesting to see how these changes could be incorporated into ‘no fault’ terminations such as redundancy.

Process defects to be more than ‘more than minor’

Finally, the Minister announced that the threshold for procedural error will be raised. It has always been a part of the Employment Relations Act that ‘minor’ procedural defects will not make a dismissal or action unjustified. However, under the new approach, a relevant factor will not be the size of the procedural defect, but instead whether the employee has ultimately been treated unfairly. How this will differ from the current ‘more than minor’ test will be interesting to see.

This change will also be accompanied by a new requirement for the Authority and the Court to consider whether the employee’s behaviour obstructed the employer’s ability to meet their obligations to act as a fair and reasonable employer. This new step will be welcome by those employers who have experienced the challenges that come with employees refusing to participate in disciplinary processes or not engaging in consultation.

Big changes coming in 2025

These policy changes, in combination with last week’s announcement removing unjustified dismissal protections for high earning employees, suggest that a significant employment omnibus bill is in the works for 2025. We will be following these closely as the legislation is developed, and further announcements are made by the Government.

Based on what we know so far, it is our view that these policies may not align with the objectives of the Employment Relations Act (as set out in section 3) or New Zealand’s commitments under International Labour Organisation Conventions. While the proposals aim to provide employers with greater flexibility, we anticipate that the Employment Court will use its broad powers to act in accordance with the principles of equity and good conscience and will interpret these provisions narrowly.

While employers may think these changes mean the tide is turning in their favour, any amendments will need to be carefully considered, and employers should proceed with caution.

This article was written with the assistance of Dan Smith, Solicitor, and Dugal Thomson, Summer Clerk in the Employment team