Changes to employment law

The Government has announced a range of changes to employment law, which could come into effect later in 2025. These changes include changes to pay disclosure regulations, employee remedies, and a test to determine whether someone is a contractor or an employee. The following are most relevant to the construction industry

One of the most significant changes for builders is the proposed introduction of a new test for determining whether a worker is a contractor or an employee. Under Construction has previously reported on this issue, such as the case of Barry vs. C I Builders Ltd. In this case, the court found that Mr. Barry was an employee, not a contractor – which he was originally engaged as.

The new ‘gateway’ test says:

• There must be a written agreement with a worker specifying that they are an independent contractor.
• The business cannot restrict the worker from working for another business (including competitors).
• The business cannot require the worker to be available to work at specific times of the day or days, or for a minimum number of hours; OR the worker can sub-contract the work.
• The business does not terminate the contract if the worker does not accept an additional task or engagement.

“The coalition Government has agreed to amend the Employment Relations Act to provide a gateway test that businesses can use when responding to a claim that a person is an employee and not a contractor,” said Workplace Relations and Safety Minister Brooke van Velden. “If the working arrangement in question meets the four factors set out in the test, then the person is considered to be a contractor. If one or more of these factors are not met, then the existing test will apply.”

In the case of Barry, he was found to be an employee because he did not work for anyone else, C I Builders restricted him from working for another business and Barry was expected to work consistent hours for C I Builders.

Minimum wage rising

From 1 April 2025, the minimum wage for adults is increasing from $23.15 to $23.50 per hour. The starting out and training minimum wage will also increase from $18.52 to $18.80 per hour.

Employee remedies

Another proposed change relates to personal grievances. The Government would like to place more emphasis on an employee’s behaviour when considering remedies for a personal grievance. If the proposal becomes law, it could:

• Remove all remedies for employees dismissed for serious misconduct.
• Remove an employee’s eligibility for reinstatement and compensation for hurt and humiliation when their behaviour has contributed to the issue.
• Allowing remedies to be reduced up to 100% for contributory conduct.
• Require the Employment Relations Authority and the Employment Court to consider if the employee’s behaviour obstructed the employer’s ability to meet certain obligations.
• Raise the threshold for ‘procedural error’ (ie, being less critical of procedural deficiencies) where the employer’s actions against the employee have been fair in all the circumstances.

“The status quo has led to increasing uncertainty and potential costs for employers and has incentivised employees to try their luck at raising a personal grievance in the hope that they will get a financial pay out,” said van Velden. “This is not the balance personal grievances are meant to strike.”

High earns dismissal claims

Plans are in process to stop staff earning more than $180,000 from bringing an unjustified dismissal claim.

“This policy is about offering workers and employers more choice when negotiating contracts. Employers and employees are free to opt back into unjustified dismissal protection if they choose to or negotiate their own dismissal procedures that work for them,” explained van Velden.

Employees who earn over the proposed threshold will still have a contractual notice period and will be able to raise personal grievances. However, it will mean higher-paid employees won’t be subject to the same termination period as those earning less than $180,000.

No consequence for pay disclosure

A Member’s Bill has also been introduced to parliament to amend the Employment Relations Act 2000 to protect employees who discuss or disclose their remuneration to third parties. Currently, it is legal for employers to include pay secrecy clauses in employment agreements, but if the bill is passed, it would mean employers can’t include such clauses.

It could also mean that employers who think they were dismissed for disclosing remuneration will have the right to make a personal grievance claim against their former employer.