Knowledge High-Income Threshold Removes Dismissal Rights: What Could Happen Next? The intended and unintended consequences.
A new law is on the horizon that could change workplace rights for high earners. Our previous article discusses how under the proposed legislation, anyone making over $180,000 a year will no longer have the automatic right to claim unjustified dismissal. While this is meant to streamline employment processes, it raises a lot of questions—and potential consequences, both expected and unexpected.
- Will this actually reduce employment claims or just mean we have different types of claims?
If the goal is to reduce personal grievance claims, history suggests it might not work as intended. When certain rights are removed, people often find other legal avenues to make their case. One example of this was when the 90 day trial period provisions came into effect. There was a number of cases where the Court used their power to interpret the law to make it difficult for employers to rely on a 90 day trial period.
High earners won’t lose all their employment rights—just the right to claim unjustified dismissal. They can still file claims for things like unfair treatment (unjustified disadvantage), breach of contract, discrimination, whistleblowing protections, and breaches of good faith under the Employment Relations Act 2000.
Looking at other countries with similar laws, there’s a pattern: when unfair dismissal claims are blocked, other types of claims rise. In the U.S., where most employees can be fired “at will,” discrimination claims are far more common than in New Zealand. The UK has a similar setup—employees can’t claim unfair dismissal unless they’ve worked for two years, and even then, compensation is capped. As a result, claims related to discrimination and whistleblowing have surged. It’s easy to imagine that something similar will happen in New Zealand, with dismissed employees framing their cases differently to fit within the remaining legal protections.
If that happens, the Human Rights Review Tribunal (HRRT) and the Employment Relations Authority could see a spike in cases, further stretching an already slow-moving system. The HRRT already has long delays, with claimants waiting years for a resolution. If discrimination claims rise, it will only get worse
2. Will high earners bargain for better terms?
One argument in favour of the law is that high-income employees have the bargaining power to negotiate better contract terms, like longer notice periods, to make up for losing their dismissal rights. In theory, this sounds reasonable—after all, senior executives often negotiate favourable exit packages.
But the reality isn’t so simple. Not all high earners have equal bargaining power. The Ministry of Business, Innovation and Employment (MBIE) identifies three broad categories of high-income earners:
- Senior executives – Think CEOs and managing directors, who have strong leverage in negotiations.
- Highly-paid middle managers – Managers overseeing teams or functions but without direct board influence.
- Highly-paid non-managers – Experts in their fields, such as doctors, engineers, and lawyers.
While senior executives may have the power to negotiate golden parachutes, middle managers and technical specialists often don’t. Their ability to demand better terms depends on market demand for their skills. Employers may not be keen to include generous notice periods, and employees may struggle to negotiate them.
3. Will the ‘Opt-In’ option work?
The law does allow high earners to negotiate an “opt-in” clause, reinstating their right to claim unjustified dismissal. But in practice, how many employers will agree to this? If businesses have a choice to avoid a legal headache, why would they voluntarily bring it back? The reality is that very few high earners will be able to secure this in their contracts, except possibly those with extremely specialised skills or significant leverage.
4. What about restraints of trade?
Many high-income employees have restraint of trade clauses in their employment agreements, preventing them from working for competitors or starting a rival business for a set period after leaving a job. Traditionally, courts have viewed these clauses as fair because employment contracts were a mutual exchange—employees agreed to certain restrictions in return for job security and other protections.
But now, the playing field has shifted. If employers can dismiss high earners without cause, will courts still see restraints of trade as reasonable? Employees might argue that since they no longer have job security, they shouldn’t be bound by post-employment restrictions. While other countries with similar laws, like the U.S. and Australia, still enforce restraints of trade, it wouldn’t be surprising if New Zealand courts start scrutinising them more closely.
5. What’s the real impact?
It’s hard to see why this change is necessary, and the justification for it feels weak when you consider the ripple effects. The idea that it will reduce litigation is flawed as it will just shift claims into different categories.
It also raises fairness questions. High-income earners aren’t all powerful negotiators; many are skilled professionals who rely on job stability. Removing their dismissal protections while still enforcing other employment restrictions, like restraints of trade, creates an imbalance that courts may not ignore.
While some businesses might welcome the ability to dismiss high earners more easily, the unintended consequences could make things more complicated—and costly—in the long run.
For all your employment law needs, whether you are an employer or employee, get in touch with the team at Black Door Law.
Disclaimer: This information is intended as general legal information and does not constitute legal advice. If you have a specific issue and wish to discuss it, get in contact with the Black Door Law team.