If you’ve been dismissed from your job in New Zealand, or you’re an employer trying to get a dismissal right, the starting point is section 103A of the Employment Relations Act 2000.
It sets out what’s called the test of justification, and it applies to every dismissal in New Zealand, whether it’s for misconduct, poor performance, redundancy, or incapacity.
The basic test
The question the Employment Relations Authority or the Employment Court will ask is whether the employer’s actions, and how the employer went about them, were what a fair and reasonable employer could have done in all the circumstances at the time. This is an objective test. It isn’t about whether the individual employer genuinely believed they were acting fairly. It’s about whether a fair and reasonable employer, in that position, could have acted the way this one did.
There are two separate things that both need to stack up: substantive justification and fair process. Substantive justification means the reason for the dismissal has to be genuine and sufficient, not a pretext or an overreaction. Fair process means the employer has to have gone about it properly. Under section 103A(3), that generally means:
- Investigating the allegations sufficiently, having regard to the resources available to the employer
- Raising those concerns with the employee before any decision is made
- Giving the employee a genuine and reasonable opportunity to respond
- Genuinely considering that response with an open mind, not a predetermined outcome
Get either the substance or the process wrong, and the dismissal can be found unjustified, even if the employer had a perfectly good reason to let someone go.
What changed in 2026
The Employment Relations Amendment Act 2026 came into force on 21 February 2026, and it’s the most significant change to this Act in 25 years. Two changes matter most for unjustified dismissal claims specifically.
First, the treatment of process defects has shifted. Previously, only minor process defects that didn’t cause unfairness could be overlooked. The word “minor” has now been removed from section 103A(5). Going forward, any process defect, whether it’s minor or more significant, won’t on its own make a dismissal unjustified if it didn’t actually result in the employee being treated unfairly. This moves the focus from technical compliance with every procedural step to whether the employee genuinely suffered unfairness as a result. It is not, however, a green light to cut corners. A robust process is still the strongest protection against a grievance claim, and what counts as causing unfairness will be worked out through the cases that follow.
Second, and this is the one getting the most attention, a new income threshold has been introduced. Employees whose annual remuneration meets or exceeds $200,000, including salary, bonuses and commissions, can no longer bring a personal grievance for unjustified dismissal. Employers are also no longer required to follow the usual good faith procedural steps when dismissing someone above that threshold. High earners retain the right to bring grievances for other things, such as unjustified disadvantage unrelated to dismissal, discrimination, harassment or duress, but the unjustified dismissal claim itself is off the table above that figure.
This applies immediately to new employment agreements entered from 21 February 2026. For employees already employed before that date, there’s a 12-month transitional period, meaning the threshold doesn’t bite until 21 February 2027, unless the employee agrees to vary their agreement and opt in early.
A related change worth knowing about: where an employee’s own conduct contributed to the situation giving rise to their grievance, remedies can now be reduced much further than before, including down to nil in cases involving serious misconduct. The Authority will also now consider, under a new section 103A(3)(e), whether the employee obstructed or frustrated the employer’s investigation process. Serious misconduct isn’t defined in the legislation, so expect this to be tested and refined through case law over the coming months.
What this means in practice
If you’re an employee on a lower or mid-range income, the core protections haven’t gone anywhere. You’re still entitled to a fair and reasonable process and a genuine reason before you can be dismissed, and section 103A still applies in full.
If you’re a high income earner, or close to the $200,000 threshold, your position has materially changed, and it’s worth understanding exactly where you sit before signing a new agreement or agreeing to any variation of an existing one.
If you’re an employer, the process bar hasn’t been lowered as much as some of the commentary suggests. The removal of “minor” from the defects test gives more room to argue that a slip in process doesn’t sink an otherwise fair dismissal, but the safest course is still to run a proper, documented process every time.
Employment law in this country moves fast, and 2026 has already brought the biggest shift in a generation. If you’re facing a dismissal, or you’re an employer trying to manage one properly under the new rules, it’s worth getting advice specific to your situation before decisions are made that are hard to undo.
Get in touch to discuss your circumstances.
This post is general information only and does not constitute legal advice. If you have a specific issue, please get in touch to discuss your circumstances.