Personal Grievance Remedies: A Whole New Era?
The Employment Relations Amendment Act 2026 (the Act) restricts or completely bans the awarding of legal relief, such as reinstatement and compensation, in the event of contributing behaviour by an employee. This is potentially a whole new era for employment law in New Zealand, in which employers adopt much more robust processes in the face of serious misconduct or other conduct which undermines the employment relationship.
However, given the Act removes long-standing protections for employees (if not fundamental rights), these provisions are likely to be upheld by the courts only under very specific conditions. As set out in ss 123B, 123C and s 124, the enforceability of these restrictions depends on several critical factors. They are:
If the Employment Relations Authority considers an employee’s conduct “contributed” to the situation that gave rise to the personal grievance, the employee will not be entitled to reinstatement or compensation (lost wages may still be available) (s123C);
Where the employee’s conduct amounts to serious misconduct and has contributed to the situation that gave rise to the personal grievance, the Authority must not award any remedies (either reinstatement, compensation or reimbursement of lost wages) (s123B).
Remedies are now able to be reduced by up to 100% where the employee’s behaviour has contributed towards the situation that gave rise to the personal grievance (s124).
Causation and contribution
The sections all refer to an employee contributing to, rather than causing, the situation giving rise to the personal grievance. The animating idea, then, is contribution not causation.
So what? Well, in law, causation tends to refer to proof that an outcome is the result of a specific action but for which the outcome would not have happened (the “but-for” test). By contrast, contribution acknowledges that multiple factors or actors played a role, even if no single factor was the sole or necessary cause of the outcome.
So, it seems the employee’s conduct need not be the sole or even dominant cause of the situation giving rise to the personal grievance. The courts will need to determine the strength of connection that is necessary to justify restriction or loss of remedies. This may or may not be the same in ss 123B and 123C as in s 124, which refers to contribution “towards” (as opposed to “contributed to” the situation).[1]
However, at the risk of adding a gloss to the sections, it seems likely that something like a “clear nexus” – a direct, undeniable connection or link between two things – will be required. This is particularly so given the somewhat draconian nature of the provisions for employees, who, it should not be overlooked, will have been found to have been treated unjustifiably by the employer.
When evaluating contribution under s 123B, a distinction must also be maintained between an employee’s actions and the consequences of those actions.
Consider a scenario where an employee makes an innocent, non-deliberate mistake that inadvertently triggers significant financial or operational fallout for a business. Loss of remedies could hinge on whether the focus is on the blameworthiness of the action itself (a minor human error) or the scale of the consequence (the commercial damage).
If remedies are denied for honest mistakes with severe outcomes, the threshold for loss of all remedies would arguably be too low.
“Serious misconduct”
“Serious misconduct” is not defined in the legislation, so early cases will need to clarify how this is to be interpreted in the context of s 123B.
Usually, in employment law in New Zealand, serious misconduct is conduct of a gravity that can justify summary dismissal. In Minhinnick v New Zealand Steel Limited[2], the Court held that a proper evaluation of serious misconduct involves the evaluation of the nature of the obligations imposed on the employee by the employment contract, the nature of the breach that has occurred and the circumstances of the breach.
A key question is whether (or the extent to which) the courts will adopt this sort of approach in the context of s 123B. However, again given the somewhat draconian result for employees, it seems unlikely they will adopt any lower threshold.
Key lessons
This is potentially a whole new era for employment law in New Zealand, in which employers adopt much more robust processes in the face of serious misconduct or other conduct which undermines the employment relationship, on the basis that employees will not have access to any or meaningful remedies in any event.
“Serious misconduct” is not defined so there is inherent uncertainty in working out whether the threshold under s 123B has been met. This is likely to give rise to more, not less, litigation.
Employers would do well to adopt a cautious approach given they retain the onus of proof and uncertainties around the causal connection required to be shown before remedies are substantially reduced or lost altogether.
Article written by Partner Stuart Dalzell and Solicitor Laura Howell.
[1] The reason for the difference in phrasing is not obvious.
[2] [2010] NZEmpC 30 at [36]