The ministry announced in December it planned to centralise mediation services and switch to the use of contract mediators in Dunedin, Napier and Palmerston North.
Three Dunedin-based positions had been on the line under the proposal.
However, it was announced yesterday the ministry had decided to retract the proposal.
It is understood at least one Dunedin-based position has been saved,and that some jobs will still be lost but not as many as first proposed.
Labour's economic development spokesman Dr David Clark said the decision was a victory for the city.
‘‘This regional mediation offering is valued by both employers and employees.
‘‘It's a successful model and to have done away with it would have been a further example of regional neglect.''
New Zealand Public Service Association (PSA) national secretary Glenn Barclay said he was pleased the ministry had listened to the outcry from local businesses.
‘‘Along with business groups and the public, the PSA made it clear privatising mediation services wouldn't deliver better resolution rates or significant cost savings.''
Figures released to the Otago Daily Times by the ministry in November showed the Dunedin mediation office had a significantly higher resolution rate for employment disputes than the national average.
Of 343 employment disputes handled in Dunedin in 2014-15, 79% were resolved, compared with the national average of 68%.
Typical cases included disputes over workplace bullying, constructive dismissal, unjustified dismissal and work hours.
