Changes to the Employment Relations Act

Thursday 5 March, 2026

If you employ staff or engage contractors, these changes affect you. Here is what you need to know.

The Employment Relations Amendment Act 2026 has commenced from 21 February 2026. These reforms make significant changes to how contractors, personal grievances, high-income employees, and unions are treated under the law.

For employers, this legislation is intended to provide greater clarity over contracting arrangements and more confidence when undertaking employment processes.  The Minister for Workplace Relations and Safety, Brooke van Velden said this law “brings more choice for businesses and workers to create and enter working arrangements that suit their individual needs.”

Contractor “gateway test” 

The new statutory gateway test determines when a worker is a “specified contractor” rather than an employee. If all criteria are met, the worker cannot challenge their status.

To qualify, the arrangement must include:

• A written agreement stating the person is an independent contractor or not an employee;
• Freedom to work for others (hours that in effect prevent someone working elsewhere do not amount to a restriction);
• Either no requirement to perform work at a specified time, day or for a minimum period (flexibility around the work), or the ability to subcontract;
• No ability for the principal to terminate the arrangement simply because the worker declines additional work; and
• A reasonable opportunity to seek independent advice before signing.

If, one or more of those conditions are not met, then the current test for determining whether a worker is a contractor will apply. 

However, the new test does not apply retrospectively to anyone who has already started proceedings in respect of their contractor status 

Amendments to remedies for personal grievances 

The Amendment Bill strengthens the consequences of employee conduct in grievance cases:

• Remedies may be reduced by up to 100% where the employee has contributed to the situation.
• If the employee’s behaviour contributed to the situation that led to the personal grievance the employer cannot be required to reinstate or compensate the employee for hurt and humiliation or loss of any benefit.
• If the contributing conduct amounts to serious misconduct, no remedies or reinstatement may be awarded.

This is likely to reduce “nuisance‑value” settlements and shift how employers assess risk.

Income threshold for personal grievance claims 

A new income threshold applies to dismissal claims. Employees earning $200,000 or more annually (including bonuses and share-based payments) cannot bring a personal grievance or legal proceedings against their employer for dismissal.

Important points:

• This restriction does not apply to other types of claims (e.g., discrimination, breach of contract, unjustified disadvantage unrelated to the dismissal).
• Existing employees have a 12‑month transition period to renegotiate terms before the threshold automatically applies.
• Employers can choose to contract out of this restriction. 

Test of justification

The test of justification focusses on whether an employer’s actions were what a fair and reasonable employer could have done in all the circumstances at the time.

A dismissal will not be deemed unjustified solely because of procedural defects. The defects must not have resulted in unfair treatment. This shifts the focus away from scrutiny of minor errors and instead the overall fairness of the process. 

Removal of the 30-Day Rule

The requirement for new hires to be employed on collective terms for their first 30 days has been repealed.

Now:

• Employees who are covered by a collective agreement can instead choose to be employed on individual employment agreements from day one;
• A copy of the collective agreement and union contact details must still be provided to those employees; and
• Unions may only be notified about a new employee if the employee consents.

Next steps 

Key areas for immediate attention for employers include:

• Reviewing contractor agreements to ensure they satisfy all gateway test criteria;
• Identifying employees earning $200k and more, and planning for transition discussions; and
• Refreshing onboarding to remove 30‑day rule requirements and updating for the new requirements. 

If you would like advice on how these changes affect your business, please get in touch with our Employment experts below.