High earners could be left without safety net
High earners could be left without safety net
Tuesday 22 April, 2025
High income earners may soon lose their right to challenge being dismissed. Workplace Relations Minister Brooke van Velden plans to introduce an amendment to the Employment Relations Act 2000 (‘ERA’) that would prevent employees earning over $180,000 from raising a personal grievance for unjustified dismissal. This restriction would apply solely to unjustified dismissal claims and not to other personal grievance grounds, such as those grounded in unjustified disadvantage or adverse treatment.
Current framework
At present, the personal grievance framework under the ERA is the only way an employee can bring a claim related to a dismissal or any aspect of the dismissal. This provision is seen as an absolute bar on employees taking alternative actions related to a dismissal, such as claims for breach of contract.
Depriving high earners of the right raise personal grievance for unjustified dismissal should deprive them of the ability to raise any claim related to dismissal. Claims related to unjustified disadvantage and breach of good faith are still possible, as long as these claims do not relate to the dismissal. However, any such claim would not result in an award of lost wages, which is often a significant component of any award.
Impact on employment relations
The proposed change raises some important questions. For example:
- Is it just to eliminate the only remedy for an employee who has been unfairly dismissed?
- Will employers be more inclined to offer salary increases above $180,000?
- Will employees be more inclined to reject salary increases above $180,000?
- Will more discrimination claims arise under the Human Rights Act?
Some commentators have observed that the change may result in more golden parachute clauses in employment agreements. These clauses provide that employers may terminate employment on a no fault basis in exchange for a payment to the employee. Generally, such clauses are considered to be unenforceable as employers cannot contract out of the obligations imposed under the ERA. One such obligation is to act justifiably. However, under Minister van Velden’s proposal dismissing high earning employees without cause would be justifiable. The golden parachute would then no longer be considered unlawful.
This change is one of suite of changes to employment law promised to come into effect during the term of the coalition government. It is certainly a contentious proposal and like other proposed amendments will be hotly contested.
