A proposed change to New Zealand employment law would create a formal process for employers and employees to discuss ending employment by mutual agreement. Although the proposal may offer a practical alternative to dismissal, resignation, or litigation, it is not yet law and should not be treated as if it were.
Is the Bill already law?
No. The Employment Relations (Termination of Employment by Agreement) Amendment Bill remains before Parliament. It has completed its first reading and select committee stage, but it must pass the remaining parliamentary stages and receive Royal Assent before it becomes law.
What does that mean in practice?
Employers cannot rely on the proposed protections yet. Initiating an exit discussion outside the protections available under current law may expose an employer to a personal grievance claim, as well as financial and reputational risk.
Until the law changes, employers should obtain advice before approaching an employee about a negotiated departure.
The Bill is intended to make agreed exits easier to discuss while introducing safeguards for both parties. Supporters view it as a practical and dignified option; critics are concerned that employees may feel pressured because employers generally hold greater bargaining power.
How do confidential exit discussions work now?
Under current law, confidential settlement discussions are protected only in particular circumstances. For example, parties may negotiate through mediation or in a genuine attempt to resolve an existing employment relationship problem.
Where the legal requirements are met, a discussion may be conducted on a without prejudice basis. This generally means the discussion cannot later be used as evidence in the Employment Relations Authority or Employment Court.
However, simply describing a conversation as “without prejudice” does not make it confidential. Whether the protection applies depends on the circumstances and the purpose of the communication.
Employers should avoid assuming an informal exit proposal will be protected from later scrutiny.
Careful preparation and legal advice remain important before any discussion about ending employment begins.
What would the Bill change?
The Bill would establish a statutory process for “pre-termination negotiations”. An employer and employee could discuss ending employment by agreement even if no dispute, grievance, performance issue, or disciplinary process already exists.
An employer could invite an employee to consider a negotiated exit, including compensation, without the offer itself automatically giving rise to a personal grievance.
If the parties reached agreement, employment could end under a written settlement rather than through dismissal, resignation, or contested proceedings.
Evidence of compliant pre-termination negotiations would generally be inadmissible in later employment proceedings, subject to the exceptions set out in the Bill.
Why has the proposal been introduced?
Not every unsuccessful employment relationship involves misconduct or a formal dispute. The Bill seeks to provide another way for parties to bring a relationship to an orderly end when continuing employment is no longer workable.
Supporters say the process could reduce workplace conflict, legal costs, delay, and uncertainty while giving both parties greater control over the outcome.
The Education and Workforce Committee reported the Bill back to Parliament in October 2025 and recommended by majority that it proceed, with substantial amendments intended to improve workability and strengthen safeguards.
Those potential benefits must be weighed against concerns about fairness, voluntariness, and the imbalance of power that can arise in employment relationships.
What concerns have been raised?
The principal concern is that an employee may feel compelled to engage in negotiations or accept an offer, particularly where continued employment appears uncertain.
Critics also argue that the process could be used to sidestep established performance management, disciplinary, restructuring, and dismissal procedures.
The effectiveness of the Bill will therefore depend on whether its safeguards are strong enough to ensure that participation and agreement are genuinely voluntary.
What safeguards are proposed?
The reported version of the Bill includes safeguards governing how negotiations begin and how agreements are made. These include limits on repeated requests, information requirements, protections against unfair conduct, a written agreement signed by both parties, advice to the employee to seek independent advice, and a reasonable opportunity to obtain that advice before signing.
What if the process is mishandled?
Failure to follow the statutory process could remove the protection that would otherwise apply to the negotiations. Unfair conduct may also expose an employer to remedies available through the Employment Relations Authority, including compensation, lost wages, reinstatement, or penalties where the relevant legal tests are met.
A party who breaches an enforceable termination agreement may also face consequences under the agreement and the applicable legislation.
What could the Bill mean for employers and employees?
If enacted, the Bill would make a significant change to New Zealand employment law by creating a defined pathway for agreed exits before a dispute arises.
For employers, it could provide a more direct way to address an employment relationship that is no longer working. It would not, however, be a shortcut around good faith, fair process, or the Bill’s procedural requirements.
For employees, it could create an opportunity to negotiate compensation and other departure terms while receiving independent advice. The key question will be whether the process feels genuinely optional in practice.
Both employers and employees should monitor the Bill’s progress and obtain advice before relying on any proposed process.
Key takeaway
The Bill may eventually provide a structured way to negotiate the end of employment, but it is not yet law. Until it is enacted, employers should not assume that direct exit discussions are protected. Mishandling those discussions can create substantial legal, financial, and reputational risk.
Need advice? Whether you are an employer considering a negotiated exit or an employee who has been approached about ending your employment, early legal advice can help protect your position and support a fair process.
If you would like assistance or legal advice, please get in touch with our team. Email admin@cmalaw.co.nz or phone 03 211 0153.
Disclaimer: This update provides commentary on proposed changes to employment law, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.