The Government passed the Employment Leave Act 2026 on August 6, 2026, which repeals and replaces the Holidays Act 2003. The new legislation introduces an hours-based accrual framework, day-one leave entitlements, and a single hourly pay rate for all types of leave.
Reduced Payouts: The Employment Relations Authority and Employment Court can cut personal grievance remedies by up to 100% if the employee's own actions contributed to the issue.
No Compensation: If an employee’s behavior has contributed to the issue, they cannot get reinstatement or compensation for hurt feelings.
Serious Misconduct: If the worker committed serious misconduct, they get zero remedies and no job reinstatement
Benefits to Employers
These changes should mean that employers should face less financial risk around dismissing an employee around defects in procedure used to terminate an employee for Serious Misconduct or where the employee behaviour has partially or wholly contributed to the situation.
A Cautionary Note!
However, in the still early days of these amendments applying and the absence of case law precedents in this area since February 21, 2026, these changes should not be interpreted that the requirements of Good Faith procedural fairness and Natural justice do not apply
Furthermore, the absence of case law to date and a statutory definition of “Serious Misconduct” means we do not have definitive guidance as to what may be regarded as Serious Misconduct. The latter is behaviour that is so severe that it undermines the trust and confidence needed in an employment relationship or causes a serious and imminent risk to safety or a business’s reputation.
This means an employee can still challenge a dismissal and can still raise a personal grievance and argue that:
the dismissal was unjustified;
the employer breached procedural fairness;
the employer failed to act as a fair and reasonable employer;
the employer breached its good faith obligations; and/or
the employer reached a decision without proper investigation
Good faith, natural justice and procedural fairness remain legal obligations under the Employment Relations Act.
Recommended Employer Actions
Because the 2026 amendment eliminates personal grievance payouts entirely if an employee is found to have committed Serious Misconduct and in the absence of case law to date, the exact definition is more important than ever for employers to get the benefits of these new provisions, employers should undertake the following
Define Serious Misconduct in Employment Documents.
Detail examples of what your business considers serious misconduct in your employment agreements, company policies and employee handbooks.
Still follow a Fair Process
While minor, harmless process defects may no longer automatically render a dismissal unjustified, a rushed or predetermined process (like deciding to dismiss an employee someone before hearing their explanation) will still look like an unjustified dismissal to the Employment Relations Authority.
For more information and specialist advice in this area, please contact me at michaelp@businesscanterbury.co.nz.