The Advocate | Issue 367| September, 2001

Changes to Personal Grievance Regime

Public submissions for the Employment Relations Amendment Bill (the “Bill”) are now closed, and we are awaiting the Select Committee’s report on the Bill, due in November. 

The next part in our Employment Relations Amendment Series focuses on some significant changes to the personal grievance regime under the Employment Relations Act (“Act”). The proposed changes “are intended to re-tilt the personal grievance system to better balance employer and employee interests”, according to the Bill’s Explanatory Note.

“ Justified” Dismissal/Action

The Bill proposes to change the test that employers must meet when they dismiss or discipline an employee in an effort to make the test more balanced. 

Where an employer takes action against an employee or dismisses them, an employer is required to show that their actions and how they acted, were what a fair and reasonable employer could have done in all the circumstances – this is the “test of justification”. The Authority or Court must consider several criteria when assessing whether an employer’s actions were justified. 

The Authority or Court must not determine a dismissal or other action to be unjustifiable solely because of defects in the process if the defects were minor and did not result in the employee being treated unfairly. 

Proposed Changes

The Bill would introduce a new criterion to be considered: “whether the employer was obstructed by the employee” during the investigation or other process. This could be, for example, by refusing to engage with the employer or hampering the investigation by threatening witnesses.

The Bill would remove the requirement for such defects in an employer’s process to be “minor”. Any defects with the employer’s process would only give rise to a personal grievance if the defects resulted in disadvantage to the employee.

Impact of proposed changes 

These changes will certainly make it easier for employers when conducting disciplinary/performance management processes or during consultation for restructuring. They will provide for an employee’s refusal to engage in such processes, or even deliberate obstruction to those processes, to be taken into account when determining whether a dismissal or other action was justified. This also means an employee won’t appear to be rewarded for bad behaviour just because the employer made a procedural error, if the dismissal was otherwise fair.

The Bill will also make significant changes to how an employee’s remedies are assessed and awarded. 

Currently, section 123 of the Act provides that if an employee is found to have grounds for a personal grievance, they may be awarded the following remedies:

Reinstatement to their role or a role no less advantageous; and/or

Reimbursement of remuneration or other money lost as a result of the grievance; and/or

Compensation for humiliation, loss of dignity, and injury to the employee’s feelings; and/or

Compensation for the loss of any benefit (monetary or otherwise) that the employee might have received had the grievance not arisen.

If the employee contributed to the situation that gave rise to their personal grievance, their remedies may be reduced. The extent of the employee’s contribution to their personal grievance is assessed and then remedies may be reduced by the same amount. For example, if the employee’s actions contributed to the situation by 20%, then their remedies could be reduced by 20%. While 100% reductions for contributory conduct do occur, they are very rare.

Proposed Changes

The Bill would introduce section 123B, which provides that if the Employment Relations Authority or the Court determines that an employee’s actions:

amounted to serious misconduct; and

contributed to the situation that gave rise to their personal grievance;

then the Authority/Court must not award any remedies at all.

A new section 123C will be added, providing if an employee's actions contributed to the situation that led to their personal grievance, they cannot receive reinstatement or compensation for emotional harm or lost benefits—even if the actions weren't serious misconduct. In this case, the employee could only be awarded lost remuneration.

For completeness, the Act would be amended to specify that any remedies awarded may be reduced by up to 100% for the employee’s contributory conduct.

Impact of proposed changes 

These are significant changes that employers should be aware of, particularly where they are looking to discipline or dismiss an employee. Under the current regime, it is almost always more cost-effective for an employer to privately settle a personal grievance than it is to defend its position in the Authority. However, with these new changes, it may well become more cost-effective in some cases to force an employee to bring a claim in the Authority. Where there are clear cases of serious misconduct, we are also likely to see a decrease in settlement amounts. 

“Serious misconduct” is not defined in the Bill. Unless it is amended to include a definition for “serious misconduct”, we expect to see more employees argue their behaviour does not amount to serious misconduct and therefore, they should be entitled to the full range of remedies. Employers should ensure that they have robust policies in place that define what constitutes serious misconduct, as this will be useful if an employee challenges whether their behaviour amounted to serious misconduct or not. 

We may also see an increase in other claims, such as breach of contract or breach of good faith, in an effort to still claim remedies from an employer where compensation would not otherwise be awarded.

While these changes are intended to lower legal risk for employers when disciplining or dismissing an employee, the Authority and the Courts are likely to take a strict approach to the interpretation of this legislation, as they have done with the implementation of trial periods. Therefore, we encourage employers to seek advice before disciplining or dismissing an employee to understand any risk and the options available in their specific circumstances.

If you have any questions about these changes, or if you would like us to draft or review your policies and processes to ensure you are prepared for the changes, please contact us to discuss further.

End of “Pay Secrecy”: Update

The Employment Relations (Employee Remuneration Disclosure) Amendment Act 2025 came into force from 27 August 2025. For advice on how this may affect current employees and updating your employment agreements, get in touch with one of the MGZ Team.