Step 2: Does a relevant exception apply? Section 2 c provides that a demotion will not constitute a dismissal for the purposes of the FW Act where: the employee remains employed with the employer that effected the demotion; and the demotion did not involve a significant reduction in the employee's remuneration or duties. When does an employer have a right to demote an employee? These circumstances include: where the employee's employment contract contains an express power of demotion, or the power to vary specific aspects of the employment relationship such as the employee's title, reporting structure, remuneration, location of employment or classification; where a relevant industrial instrument contains an express term allowing for demotion without termination of employment; or where the employee expressly consents to or authorises the demotion.
What are the consequences of demoting an employee absent an express right? In Whittaker v Unisys Australia Pty Ltd [] VSC 9, Justice Ross adopted the following passage from Macken, McCarry and Sappideen's, Law of Employment, 3rd edition : …Serious, non-consensual intrusions upon the status or responsibilities, as well as upon the remuneration, attaching to a job may well be held to amount to a repudiation of the contract of employment, and their actuality will not be denied merely by the retention of the job's title.
Risks associated with demotion Unfair dismissal An employee who has been demoted may commence unfair dismissal proceedings against an employer alleging that the demotion involves a dismissal, and that the dismissal was harsh, unjust or unreasonable.
An employee will not be entitled to unfair dismissal protection if the employer can establish that: the demotion does not constitute a dismissal under section 1 , because the change in the employee's remuneration or duties was authorised by the employee's contract of employment; or the demotion does not involve a significant reduction in the employee's remuneration or duties and the employee remains employed with the same employer s 2 c.
This will necessarily be considered on a case by case basis. Adverse action A threat or decision to demote an employee can constitute adverse action, even in circumstances where an employee's contract of employment contains an express power to vary the employee's remuneration or duties.
Breach of contract Where a contract of employment does not expressly permit an employer to alter an employee's remuneration or duties, an employee who is demoted may be able claim breach of contract on the basis that the employer has varied the employee's position without consent, and therefore repudiated the employment contract. Redundancy There are some circumstances, such as a restructure, where a demoted employee may be entitled to redundancy payments for the termination of their original employment contract, despite the fact that they remain employed albeit on different terms.
Making the case: Insights from Geoff Giudice An employee who has been unilaterally demoted can make an application under the unfair dismissal provisions in the Fair Work Act Cth , but only in particular circumstances.
Leaving aside the other statutory qualifications and focussing only on unilateral demotion, whether an employee can make an application depends upon the answer to two questions: was there a demotion in law? Key Contacts We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need.
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My Documents. Material personally selected by your relationship manager for your interest. Access all of the content that you have previously selected to bookmark. Ashurst Worldwide. Alternatively, you might consider lodging a formal grievance, to give your employer the opportunity to resolve the issue before it goes any further. You can read more about grievances here.
This is essentially when you start doing the new role but you make it clear that you do not agree to the new terms. You could do this pending a resolution of a grievance, for example. You should regularly confirm in writing that you are working under protest, and you should not do so for too long, otherwise you could damage any future claim for constructive dismissal. You might also consider resigning and making a claim for constructive dismissal, if you have worked for your employer for more than two years.
However, the strength of a potential claim will depend on your specific circumstances and you should always seek independent legal advice before you resign. Please click here to see our specific page on constructive dismissal. If you think that you are being unfairly demoted and the demotion involves a reduction in pay, then you might also be able to make a claim for unlawful deduction from wages , depending on your particular circumstances.
If your employer thinks that you are significantly underperforming, it may seek to demote you as an alternative to dismissal. Your employer would also need to have followed a fair procedure and have already taken some performance-related disciplinary action. This might include putting you on a Performance Improvement Plan which you have not passed and giving you a formal written warning. Please click here to see our specific page on performance issues.
If you have committed a misconduct at work, then a demotion could be a viable alternative to dismissal, particularly if you are an otherwise valued member of the company or you have been employed for a long time.
Again, the misconduct would usually need to be sufficiently serious to potentially justify dismissal for demotion to be a fair alternative and your employer would still have to follow a fair disciplinary procedure. Please click here to see our specific page on disciplinary and the necessary process. Career paths are never a straight line. Chances are that the hiring manager has a reversal or two in their work history.
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The employee may be prepared to accept a demotion as an alternative to dismissal. For example, the employee may agree to take a less senior position following a performance improvement procedure, if the alternative is dismissal. Or the employee may accept a demotion as part of a restructure, where the alternative is redundancy. There may be a clause in the employment contract that allows the employer to demote the employee in certain circumstances, for example as a disciplinary sanction, or a general clause allowing it to change the employee's terms and conditions.
Even where there is such a clause, the employer should ensure that it is acting reasonably. It should consult the employee over the change, making sure they understand the reason behind it, and attempt to obtain their agreement.
Where the demotion is an alternative to a dismissal on the grounds of misconduct or underperformance, the employer must have followed the relevant procedure. If the employer goes ahead with the demotion without the employee's consent or the contractual right to impose it, the employee could continue to work under protest and bring a breach of contract claim, or they could resign and claim constructive dismissal.
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