Demotion = Dismissal

Many employers are now very familiar with the expansive protections provided to employees within Australia by the unfair dismissal provisions of the Fair Work Act 2009.

In general, as an employer, you can’t just fire a difficult or under-performing employee without a fair process being followed. The same principle applies to demoting employees. Section 386 of the Fair Work Act 2009 provides that a demotion can constitute a dismissal where the demotion involves a significant reduction in the employee’s remuneration or duties.

This section was recently relied upon by an employee of an engineering company who was demoted from a senior supervisory role to a technical, non-client-facing role and subjected to a 9.3% reduction in his remuneration. Notwithstanding that the employee remained an employee of the engineering company, the Fair Work Commission found that the employee had been unfairly dismissed.

It is interesting to note that section 386 applies where a demotion involves a significant reduction in an employee’s remuneration or a significant reduction in an employee’s duties. This means that only one of these elements is required for an employee to bring a successful action. Employers should be careful to avoid clear cases such as the example referred to above. However, employers should also be aware that certain changes in an employee’s role or duties may be perceived by the employee as a significant reduction in duties (even if the employer does not share this view) and provide grounds for the employee to bring an action.

Finally, the case illustrates that demotion cannot be used as a punitive or disciplinary measure as demotion can give rise to an application for unfair dismissal.

Please feel free to contact S%BD%AC%C2%E2%99%8E%B6%BD%AB%ACx if you have any questions.