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Interim reinstatement and the new section 123C of the Employment Relations Act 2000: A legislative collision or a workable accommodation?

2026 has seen the biggest changes in employment law since the introduction of the Employment Relations Act 26 years ago. Among those changes are a radical overhaul of remedies for personal grievances, making it more difficult for an employee to obtain remedies for personal grievances in numerous circumstances. One of those circumstances is prescribed by the new section 123C of the Employment Relations Act, which prevents the Authority or Court from awarding reinstatement or compensation where it finds an employee’s own conduct contributed to the situation giving rise to their personal grievance. 

It appears that less attention was paid, at the time section 123C was enacted, to what would happen to the Authority’s existing interim reinstatement jurisdiction under section 127 of the Employment Relations Act once that bar took effect. Several months into the new regime, a number of determinations have explored how the two provisions interact in practice, and the interlocutory landscape for reinstatement applications has changed as a result. Is this in fact a legislative collision, or is there a workable accommodation between the new law and interim reinstatement?

The statutory tension

Similar to other interlocutory applications, section 127 of the Employment Relations Act exists to preserve the status quo. It allows the Authority to order an employee back into their role while a personal grievance is investigated, borrowing from the law of interim injunctions: some harms cannot be adequately remedied by money, and the balance of convenience may favour keeping someone employed until the merits are tested. Section 127(4) makes that injunctive law explicit, and section 127(2) requires the employee to file an undertaking to meet any damages later ordered arising from the interim order.

But the new section 123C operates differently from the prior law on remedies. It is not concerned with preserving positions pending determination; it mandates an outcome once determination occurs. Where the Authority or Court finds the employee’s own actions contributed to their grievance, reinstatement and compensation are simply unavailable. There is no discretion left to weigh: the prohibition is a blanket one. Where does this leave interim reinstatement applications? Clearly a final outcome cannot be determined at this stage, and a finding on contribution cannot be made as the evidence is as yet untested. How is this conundrum to be resolved? 

Where the Authority or Court finds the employee’s own actions contributed to their grievance, reinstatement and compensation are simply unavailable. 

Putting section 127 and the new section 123C alongside each other, a question arises: if an employee obtains interim reinstatement and the substantive hearing later finds their own conduct contributed to the dismissal, have they received the remedy section 123C was intended to foreclose? If so, have they received this remedy “unlawfully” (contrary to section 123C), and what consequences might flow from this? 

Recent Employment Relations Authority determinations have touched on this issue but have not conclusively answered whether an employee in that position has received a remedy section 123C was intended to foreclose. None has expressly decided whether interim reinstatement itself falls within section 123C, or whether a later finding of contribution affects the validity of an earlier interim order. In Waanders v MSX International Australia Pty Ltd [2026] NZERA 411, the Authority instead considered section 123C within the arguable case for permanent reinstatement, recognising that contribution may not be capable of determination at the interlocutory stage. 

That approach suggests that a later finding of contribution would bar final reinstatement and compensation, rather than retrospectively invalidate an interim order properly made under section 127. That approach seems consistent with the nature of an interim reinstatement order. It is a provisional order made without any finding on the merits, reversible, and backed by a damage undertaking directed at this contingency. Section 123C bars the Authority from awarding reinstatement as a final outcome; it does not address the interlocutory power to preserve a status quo while that outcome is pending. However, the precise relationship between the two provisions remains open for authoritative determination.

The middle ground: integrating section 123C into the arguable case test

The interim reinstatement test requires an arguable case that the employee will ultimately obtain permanent reinstatement, alongside the balance of convenience and overall justice. Section 123C is relevant to this limb of the test: if permanent reinstatement is effectively unavailable because a finding of contribution is likely on the available evidence, the arguable case for the final remedy the interim order would protect is weakened or removed.

This was the approach taken in Waanders v MSX International Australia Pty Ltd [2026] NZERA 411. A technical trainer was dismissed after a training course was disrupted amid client complaints and his own lack of response to his employer during the events in question. The Authority found his standard of delivery and his absences were not, on the interim evidence, contributing actions, since a fair employer’s assessment of that conduct remained contestable. His sustained failure to communicate during that period was, however, found to be “at the very least arguable” contribution, applying the culpability and blameworthiness approach drawn from established section 124 case law. This left only a weakly arguable case for permanent reinstatement, which, combined with a balance of convenience favouring the employer, resulted in the application being declined.

Where facts are contested, the Authority has not made findings on contribution at the interim stage. Mitchell v Tasman Rugby Union Incorporated [2026] NZERA 435 is an example: despite the employer’s submission that it held uncontested evidence of serious misconduct sufficient to engage sections 123B and 123C, the Authority declined to make the “definitive findings” needed to extinguish the remedy at an interlocutory hearing, on the basis that each allegation’s characterisation remained disputed. An arguable case for reinstatement was found to exist.

Another case has found that section 123C can also operate alongside, rather than instead of, the practicability and reasonableness inquiry under section 125. 

Another case has found that section 123C can also operate alongside, rather than instead of, the practicability and reasonableness inquiry under section 125. In GLM v Kāinga Ora - Homes and Communities [2026] NZERA 456, an employee dismissed while facing serious violence and firearms charges, and subject to a 24-hour bail curfew, sought interim reinstatement. The Authority found it was “not clear reinstatement is an appropriate interim remedy” whether considered “under s 125 of the Act or in light of s 123C” and declined the application on the basis that GLM had not met the threshold for an arguable case. The determination treats section 123C as an additional consideration within an assessment that already weighed against reinstatement on practicability grounds, rather than as a separate, standalone test.

A similar distinction emerged in Doyle v New Zealand Steel Ltd [2026] NZERA 536. The Authority considered that Mr Doyle’s leave-recording errors “comfortably” established contribution, but there was insufficient information at the interlocutory stage to determine whether the conduct amounted to serious misconduct for the purposes of section 123B. Interim reinstatement was nevertheless declined because the loss of trust associated with his supervisory and payroll responsibilities made permanent reinstatement unlikely, and the balance of convenience favoured the employer. Doyle therefore shows that an unresolved statutory bar does not end the inquiry: the application may still fail under the orthodox practicability and balance-of-convenience limbs.

Allocating risk: the undertaking and its limits

Where contribution is arguable but unproven, the risk is managed through the section 127(2) undertaking. By seeking interim reinstatement, the employee accepts the financial risk of compensating the employer if the substantive claim is later barred by section 123C. 

It has been rare, but not unheard of, in the employment law jurisdiction for an undertaking as to damages to be enforced. In the 2006 case of Empress Abalone Limited v Langdon AEA 29A/06, the Authority ordered the employee, who had been reinstated on an interim basis on garden leave only, to repay the exact wages plus interest when they were found to have been justifiably dismissed. However, the Employment Court has made it clear that imposing significant financial liability on an employee who has given an undertaking for damages in a reinstatement case does not align with the statutory scheme of the Employment Relations Act, as noted by Chief Judge Inglis in Vegepod v Lowe [2025] NZEmpC 76 (at paragraph 93). 

Will this approach change, now that section 123C (and its counterpart for serious misconduct section 123B) have been enacted? Courts generally apply ordinary commercial injunction principles to quantify liability under an undertaking, assessed on a “but for” contractual basis aimed at restoring the party to their original position, as noted by the former Chief Judge Goddard in Empress Abalone Limited v Langdon [2004] 1 ERNZ. Under the new law, if an employee actually worked pursuant to an interim reinstatement order, but was subsequently found to have contributed to the grievance disentitling them from being reinstated, would the employer be able to claim back the wages paid to the employee? And would the employee be able to offset the value of that labour against wages claimed back? A blanket refund seems unlikely, unless the employee was on garden leave or their presence was actively detrimental. However, this is uncharted territory in the employment law jurisdiction.

However, this is uncharted territory in the employment law jurisdiction.

Mitchell v Tasman Rugby Union Incorporated (referred to above) also shows a further option available to the Authority: rather than an all-or-nothing order, it reinstated Mr Mitchell to payroll only, backdated, without requiring or permitting a return to his substantive duties, in light of the breakdown in the governance relationship. A payroll-only order of this kind reduces the potential damages exposure under any later undertaking, since there is no labour value to offset and no risk of the employee’s presence causing detriment.

Employers should not assume, however, that they can convert an interim reinstatement order into something payroll-only of their own accord. Where the order requires return to a substantive role, restructuring around it does not amount to compliance. This was seen in Du Fall v Board of Trustees of Mokoia Intermediate School [2026] NZEmpC 111, where an executive officer reinstated by an earlier interim order was placed by her school board into a lesser role on the same pay after her duties had been outsourced during the interim period. Judge Doyle held this did not comply with the reinstatement order, on the basis that an employer put on notice that reinstatement is sought “must be alive to the possibility” that organisational changes may need to be unwound. Clearly, the scope of any payroll-only accommodation is for the Authority or Court to fix at the time an order is made, rather than something an employer can determine unilaterally once a full reinstatement order already exists.

The tactical shield: strike-out and section 178A

Where an employer’s evidence of contribution is not disputed, the application itself may be vulnerable to a more decisive response than opposing it on the merits. Clause 12A of Schedule 2 allows the Authority to dismiss, at any time, any matter it considers frivolous or vexatious, though the threshold is high: a claim must be so clearly untenable it cannot possibly succeed. This standard is not intended as a shortcut around a genuine contest of facts, but could it be met by documentary, uncontroverted evidence of contribution such as gross misconduct? Employers facing an application built on a claim to permanent reinstatement that section 123C would bar on the employer’s own unchallenged records have the option of a clause 12A application, in addition to resisting the interim application on its merits.

The safety valve for employees sits in section 178A. A clause 12A dismissal can be challenged in the Employment Court, and if the Court is not itself satisfied the matter is frivolous or vexatious, it must direct the Authority to investigate and determine it properly.

Practical implications

For employers, the response to an interim reinstatement application in the current legal landscape can be informed by these determinations. Presenting clear evidence of contribution at the interlocutory stage, as in Waanders, can be relevant to the arguable case limb. Where that evidence is not disputed, a clause 12A strike-out application, or the practicability arguments accepted in GLM, are available options in addition to opposing the application on its merits. Employers should also be aware, per Du Fall, that organisational changes made after reinstatement has been sought may need to be reversed if a permanent reinstatement order is subsequently made and the changes are inconsistent with it.

For employees and their advisers, seeking interim reinstatement carries a greater financial risk where contribution is arguable than under the old law, since an adverse substantive finding may result in liability under the section 127(2) undertaking. Where a working return is impracticable, but the underlying contribution case is contested, a payroll-only order along the lines made in Mitchell is one option that may be sought, rather than treating reinstatement as all or nothing.

Retrospectivity: when does the new law actually apply?

A separate threshold issue arose in Ni Ding v Vice-Chancellor of the University of Auckland [2026] NZERA 534. Although Dr Ding filed her Authority proceedings after s 123C commenced (on 21 February 2026), she had raised her grievances and consistently sought reinstatement before commencement. Applying section 33 of the Legislation Act 2019, the Authority held that reinstatement formed part of an existing legal position: the personal grievance could not sensibly be separated from the resolution sought, and filing proceedings was merely a step towards completing that pre-existing “matter”. Section 123C therefore did not remove reinstatement as an available remedy, even if there had been contribution (which was not traversed). The application was still declined on balance-of-convenience and overall-justice grounds. 

The practical point is that practitioners should identify not merely when proceedings were filed, but when the grievance was raised and reinstatement was first communicated as the remedy sought.

Looking ahead

Waanders, Mitchell and GLM show section 123C being considered within the arguable case, balance of convenience, and practicability limbs of the existing section 127 test, rather than as a standalone statutory override. Du Fall, while decided under the general law of reinstatement compliance rather than section 123C itself, indicates that once an interim order is made, its terms are not open to unilateral variation by the employer. 

Ni Ding adds an anterior question to the approach taken in Waanders, Mitchell, Doyle and GLM: before considering how s 123C affects the interim test, the Authority or Court must determine whether the provision applies to the grievance at all. Where it does, the cases generally treat the statutory bars as relevant to the arguable case, practicability and balance-of-convenience assessments, rather than as standalone overrides of section 127.

This area of law however is a rapidly developing one. Further determinations from the Authority and Court on these somewhat vexed issues are likely to keep employment law practitioners interested and engaged for some time yet.  

- Catherine Stewart
Employment Law Specialist
NZBA Employment Committee Member