22
LEGAL AND HR
NATIONAL
“You’re demoted!” The issue of demotion may arise in many circumstances, but when is it lawful? Demotion is legally defined as a “significant reduction in … remuneration or duties; and … [the employee] remains employed with the employer.”1 Demotion should not be confused with a lawful and reasonable direction given to an employee to undertake duties, which form part of the scope of employment.2 If the reduction is “significant”, an employee may claim that he or she has been dismissed. That leaves us with the question, what is “significant”? There is case law that provides guidance on this question. For example, in a 2016 decision,3 it was determined that a reduction of $1.00 per hour in an employee’s remuneration and removing certain supervisory responsibilities constituted “significant reduction” in the employee’s wages.
So, when can you actually demote an employee without the risk of terminating their employment and facing a claim? Well, there are limited situations, but it can be done legally.
acceptance of the demotion, he or she would be subject to a new employment contract.7 That should be reflected in writing and presented to the employee as soon as practicably possible.
These circumstances include:
If there are no express provisions in the employment contract or applicable instruments or if authorisation is not obtained from the employee, an employee can claim to have been demoted, even if the employee remains employed with the business in the demoted role without completely consenting to the demotion.8
• a provision or clause in an
employment contract that contains an employer right to demote or vary certain aspects of the role, such as title, remuneration, location, department, classification;4
• a provision or clause in a Modern Award, Collective or Enterprise Agreement;5 and
• consent or authority (best practice – written) from the employee.
If you are ever faced with the possibility of having to demote an employee, it may be worth considering alternatives, particularly in situations where the employee may not consent to the demotion.
If you are ever faced with the possibility of having to demote an employee, it may be worth considering alternatives.
If a demotion involves “significant reduction” in duties or remuneration but is rejected by an employee, the business may need to pay out the applicable notice and redundancy package required.
If a demotion is lawful, the contract will be deemed as having been terminated.6 If the employee remains engaged by the business after
1 Fair Work Act 2009 (Cth), s 286(2)(c). 2 Miller v University of New South Wales [1999] 1307 IRCommA. 3 Phillip Moyle v MSS Security Pty Ltd [2016] FWCFB 273. 4 Hermann v Qantas Airways Ltd, PR925901. 5 Ibid. 6 Charlton v Eastern Australia Airlines Pty Limited, PR972773 [2006] 154 IR 239. 7 Tokyo Network Computing Pty Ltd v Tanaka [2004] NSWCA 263. 8 Irvin v Group 4 Securities Pty Ltd, PR925901.
mga.asn.au | June 2019 | Edition 4
If you require any further information or assistance, please do not hesitate to contact our Legal and HR team directly on 1800 888 479 (option 1).
