K3 Insights

Introduction

Changes are on the horizon for New Zealand’s employment landscape. The government is proposing key amendments to the Employment Relations Act 2000, aimed at restoring balance to the personal grievance process. These reforms are designed to ensure that employees are accountable for their conduct when raising personal grievances - giving employers greater clarity and protection against unjustified claims.

Understanding Personal Grievances

Under current employment law, employees can raise a personal grievance if they believe they’ve been unfairly dismissed or subjected to unjust treatment at work. Available remedies include reinstatement, lost wages, and compensation for emotional harm. However, the current framework has led to situations where employees who engaged in serious misconduct still receive financial remedies due to procedural technicalities. This has increased costs for employers and incentivised some employees to raise low-merit claims.

This imbalance has led to increased costs and uncertainty for employers - often discouraging legitimate disciplinary action due to fear of legal repercussions.

Why Reform Is Needed

The government has pinpointed several areas where the current system falls short:

• Strict procedural rules: Even small technical errors in a disciplinary process can result in costly penalties for employers, regardless of the employee’s misconduct.
• Escalating compensation: Awards for personal grievances - especially for emotional distress - have risen significantly, increasing the financial burden on employers.
• Limited ability to reduce remedies: While courts can reduce awards if the employee contributed to the situation, recent decisions have made it difficult for employers to obtain reductions beyond 50%.

What the Proposed Reforms Include

To address these challenges, five key changes have been proposed:

No remedies for serious misconduct
Employees found to have committed serious misconduct—such as theft, violence, or serious dishonesty—will not be eligible for financial compensation. This change allows employers to take justified disciplinary action without the looming threat of financial penalties.

Reduced remedies for contributing employees
If an employee’s behaviour contributed to the grievance situation, they will no longer be eligible for reinstatement or compensation for emotional distress. However, they may still recover lost wages.

Remedy reductions up to 100%
Courts and tribunals will be able to reduce awards entirely, if appropriate. This gives decision-makers greater flexibility to reflect the realities of each case.

Accountability for obstructive conduct
If an employee has delayed or avoided the disciplinary process—such as failing to attend meetings or hindering an investigation—this behaviour will now be considered when determining remedies.

Greater leniency for minor procedural errors
Employers will no longer face penalties for minor flaws in the disciplinary process, provided their actions were otherwise fair and reasonable.

What This Means for Employers

These reforms represent a meaningful shift toward a fairer employment dispute system. If enacted, the changes will:

Promote accountability from both employers and employees.
Reduce speculative or low-merit personal grievance claims.
Allow employers to manage misconduct with greater confidence and less fear of financial fallout.
Align New Zealand more closely with international practices, including Australia’s more restrained approach to compensation for distress in cases of misconduct.

Final Thoughts

At its core, this proposed legislation is about fairness—ensuring that genuinely mistreated employees still have access to justice, while discouraging opportunistic claims that burden businesses.

If your organisation is navigating a disciplinary matter or facing a personal grievance, our employment law team is here to help. We can guide you through your obligations, assess risks, and ensure your processes are both fair and legally sound.

Need advice on how these changes might affect your business?
Get in touch with us today - we’re here to help you stay informed and protected.