The Employment Relations (Termination of Employment by Agreement) Amendment Bill was introduced in November 2024 and proposes significant changes to employment law in New Zealand.

The bill seeks to simplify employment terminations by allowing employers and employees to engage in “protected” negotiations to end an employment relationship.

However, while the stated aim is to create a more efficient resolution process, critics warn it could weaken worker protections and give employers too much power.

How the Employment Relations Act currently works

Under the current Employment Relations Act 2000, employees who believe they have been dismissed unfairly can raise a personal grievance claim. If successful, they may be entitled to compensation and reinstatement, among other remedies. Disputes are typically resolved through mediation or, if necessary, by the Employment Relations Authority or the Employment Court.

Under the existing framework, employers
must have a valid reason for termination and
follow a fair process, which includes:

• clearly explaining the reason for termination
• allowing the employee to respond before a final decision is made
• letting the employee bring a support person or representative
• making an unbiased decision based on relevant facts.

Proposed changes under the bill

The bill introduces several key changes that
are a departure from the current legislation:

Employers would be able to initiate “without prejudice” discussions with employees regarding termination, even when no existing employment dispute is present. Currently, termination discussions generally arise from an identified issue, such as misconduct or redundancy. This change gives employers more flexibility to propose termination without formal grounds.

Any settlement reached under these discussions would be legally binding, provided the employee consents and receives specified compensation. Under the existing law, settlements are typically reached through mediation or formal dispute resolution.

Employees would be advised but not required to seek independent legal advice before agreeing to a termination settlement. This could leave some employees vulnerable if they choose not to seek advice before signing an agreement.

An employee could not raise a personal grievance just because an employer offered a termination agreement. Currently, employees could potentially raise a claim if they felt pressured into resignation or if the offer suggested constructive dismissal.

The bill would prevent employees from using pre-termination discussions as evidence in disputes, except in cases of fraud or misconduct. This means employees might struggle to prove they were unfairly pressured into resigning. Currently, discussions leading up to termination may be examined in grievance proceedings.

Risks for employees

This bill mirrors the legal framework in the UK, where employers and employees can engage in “protected conversations” about potential exit agreements without the fear that the discussion will be used against them in any future legal disputes. Supporters argue that this will create a more efficient and certain process. However, opponents warn that employers, who typically hold more bargaining power, may benefit more from these conversations than employees.

The bill does not set limits on when an employer can suggest termination. This means an employer could approach an employee at any time, even when the employee is vulnerable, such as during a stressful period at work or in their personal life. Unlike a redundancy or dismissal, where strict legal processes must be followed, these discussions could pressure employees into leaving without formal protections.

For example, an employee facing a personal crisis, like caring for a sick relative, might feel compelled to accept a severance offer even if they would prefer to remain employed. In a formal redundancy or dismissal, the employer would need a fair reason and to follow due process, but under this bill, they could simply propose an exit deal without justification.

Although the bill allows employees to seek legal advice, this safeguard remains optional. Employees facing financial hardship or lacking a clear understanding of their rights may feel pressured to accept termination agreements. This could lead to employees waiving their rights unintentionally and signing away job security without realising the consequences.

What this means for workers

The bill has been met with significant opposition from employee advocates and unions, who warn it could weaken protections against unfair dismissal. By allowing employers to bypass formal termination procedures, it may shift the balance of power further in favour of employers, making it harder for employees to challenge unfair treatment.

If passed, this bill would mark one of the most significant changes to New Zealand employment law in recent years. Employers and employees alike should pay close attention to its progress and be prepared for the potential impact on workplace rights and obligations.