Is Demotion Better than Being Sacked?
Depending on your individual circumstances, demotion is not necessarily better than being sacked in Australia. Both functionally and legally, it can be the case that there is not much difference between demotion and sacking. If you are demoted in your workplace, is this something that you have to live with? What are your options under the Fair Work Act 2009
This Article will discuss the circumstances under which demotion occurs in the workplace. The reasons it may be happening (really), and what your rights are as an employee.
What Is Demotion?
Demotion is, strictly speaking, is a reduction of your employment to a lower grade or class. It is a reduction in pay, benefits, or other conditions of employment. It can also mean a removal from or reduction in certain duties performed in the course of employment. This can include the lack now of promotional opportunities.
In the usual scenario, you’ve been hired in or promoted to a certain role, job-title, and associated paygrade within your workplace. Then, at some point, you are removed from that role or assigned a lower pay-grade—or both, or more.
You are not dismissed from your company. It is not clear that you’ve become redundant. You’re simply suffering a pay reduction while, often, performing the same job or same set of tasks under a different job-title or grade. The worst case scenario from a humiliation standpoint is a requirement that you train your hard-won skills to another employee. Who will be promoted into your former position.
Sound familiar?
Or have you, alternatively, had the experience of simply being sacked rather than being absorbed back into your team, along with your skillset? This may all sound more or less familiar to you if you’ve functioned within any sort of larger enterprise. The real question at the core of the “What is demotion?” inquiry is whether or not Australian employment law has anything to say about it.
But, first, a basic question: is a demotion fair?
Is Demotion Fair?
Demotion can feel very unfair indeed. In particular, when you are demoted in the final stage of your working life, as you arc toward retirement, a demotion may feel like a slap in the face. Is this how you are thanked for years of service? Maybe your just getting slow as you get older. Is there something in the adage you can’t teach an old dog new tricks”.
There can be many reasons for a demotion. While it is possible that some of those reasons may relate to the quality of your work, work habits, or even personality conflicts in which you may be involved, there may be other reasons for a demotion that are entirely impersonal. Your company may be suffering income loss. A middle manager may be under pressure to trim your department’s operating cost. The work you perform may indeed have become functionally redundant with technological advances and the implementation of new software tools.
The bottom line is that the question of fairness is generally beside the point. To you, a demotion will never feel fair. It very well may not be fair, any way you slice it. As noted above, the key question to ask is whether or not your demotion is legal under the Fair work act.
Must You Accept a Demotion?
You are not required to accept a demotion. No one can make you do something you don’t want to do. We do not have slavery in Australia. However, the alternative will usually be dismissal if you do not. If you refuse a demotion and you are then sacked by your employer, you have the right to make an unfair dismissals claim with the Fair Work Commission (FWC).
What are your odds of success. It depends upon your individual circumstances and the specific circumstances of your demotion and dismissal.
Is It Legal For My Employer to Demote Me?
It is legal for your employer to demote you unless—it isn’t. Under the Fair work Act, a demotion constitutes a constructive dismissal under specific circumstances only. In general, where the demotion amounts to a repudiation of your employment contract. This will primarily be the case where your remuneration or wages decrease significantly as a result of the demotion.
For a demotion to constitute a constructive dismissal, (forced resignation) it must involve a “significant reduction” in remuneration or duties. Section 386(c) of the FWA states that a demotion is not an unfair dismissal if it does not involve a significant reduction in remuneration or duties—and the employee remains employed with the employer who demoted the employee.
If you quit your job after being demoted, it is not a unfair dismissal l if this requirement is not met. A demotion in title that does not equate to a demotion in remuneration or duties, for example, will not be an illegal demotion entitling you to relief under the Fair work.
So what is a “significant” reduction in remuneration?
The answer to this question will vary from case to case, depending upon the specific circumstances and numbers involved. In general, the reduction in wages needs to be a large one, although some case-law in Australia indicates that reductions of over 9% of a demoted employee’s income could be “significant” enough to warrant relief.
For example, in the unfair dismissal case of Johnson v Zehut Pty Limited T/A URBRANDS, the demoted employee suffered a reduction of more than $30,000 per year as a result of demotion. The employee refused to accept this change in conditions and was terminated. The FWC ruled in favor of the demoted and dismissed employee in that case, holding that a $30,000 reduction in pay constituted a repudiation of the employee’s original employment agreement.
Unfair dismissal outcomes can be confusing
Likewise, in the unfair dismissal case of FLSmidth Pty Limited T/A FLSmidth Pty Limited, the Fair work found that 9.3% reduction in pay of an hourly wage employee who was demoted was duly “significant.” In that case, in addition to the pay-cut, the employee was also removed from duties involving the supervision of other employees and from duties involving direct client contact. This constituted a significant reduction in duties as well as remuneration, the FWC held.
On the other hand, in another recent unfair dismissal case, NSW Trains v James, the Fair work did not find a wage reduction “significant” even though it involved a nearly 10% reduction in wages.
What was the difference?
In this case, the employee’s enterprise agreement contained a provision allowing for demotion in position rank or grade and pay where employee misconduct is the basis for the demotion.
The Right to Demote in Employment Contracts
Thus, it is vital to refrain from fixating on wage reduction percentages and, instead, look first at the bigger employment picture when demotion occurs. Is there a contract, statute, or enterprise agreement supporting the demotion? Was the demotion for “cause” (because you screwed up, that is)? An employer can legally demote you, in particular, if your employment contract explicitly states that it can.
Where an employment contract plainly states that the employee accepts the job under the condition that the employer maintains a right to demote the employee or to reassign duties, job-titles, or job locations in its discretion, the demotion will likely be found legal. Likewise, where an instrument or aware similarly allows demotion, the employer will be within its rights to demote employees.
Is Your Employer Required to Give You Notice of Demotion?
A smart employer would certainly give you notice of the demotion, the contractual or other legal basis for the demotion, and any misconduct-related reasons for the demotion. Are employers required to do this? You are entitled to understand what your rate of pay is, as well as the other conditions of your employment. If you are employed under the terms of a contract, your employer must certainly inform you if those terms are altered.
However, there is no specific requirement in the Fair work regime that you be given any particular amount of notice. 3 months vs. 3 days, there is no legal distinction. That said, an abrupt demotion involving a significant reduction or change in your assigned duties and, especially, work location would be something to discuss with your unfair dismissal representative afterward.
It could be one of the specific facts of your case that the Fair Work Commission finds … convincing.
Does Demotion Always Mean a Pay-Cut?
Without a “significant” reduction in wages, you are left arguing that your demotion constitutes an unfair dismissal due to a significant reduction in duties alone, responsibilities or promotional opportunities. This is a taller hill to climb. Being demoted from CFO to janitor without a reduction in pay might be a shocking enough transition to convince the Fair work that your demotion is, in fact, a constructive dismissal.
Less obvious departures from prior duties will make for more difficult arguments. At some point, the hospital Chief of Staff demoted to night watchman will have a good argument to make. However, as noted above, this will always be a specific argument tailored to your specific facts.
What Are Your Rights If You Are Demoted?
Importantly, aside from the question of the significance or size of a wage reduction resulting from demotion, you only have the right to file a claim with the Fair Work Commission if:
- You have worked for the demoting employer for 6 months or more;
- You are covered by an agreement or award;
- Or you earn less than the “high-income threshold;”
- And you file within 21 days of a dismissal resulting from a refusal to accept a demotion.
If your employer is a small business, you must have worked for 12 months or more before enjoying the right to an unfair dismissal complaint.
Otherwise, given the last requirement, time is always of the essence if you think you have been constructively dismissed in being demoted. That aside, if your demotion fits into these circumstances, what are your rights? You have, as noted above, a right to make a complaint of unfair dismissal with the FWC.
What Is the Process for an Unfair Dismissal Claim?
If you believe that your demotion may constitute an unfair dismissal, your first step is to speak with an unfair dismissals lawyer or representative to review your options—and your rights. Beyond that, however, first you must prepare to file your unfair dismissal claim with the FWC. Doublecheck that you meet the criteria required. Ask yourself how long you’ve been employed. Ensure that you are an employee protected under the FWC and not one that earns more than the high-income threshold or is a casual employee only.
Next, ask yourself what you want out of the complaint process. Are you looking to be reinstated in your former, pre-demotion position? Will compensation satisfy you? How long will be be out of work? It’s important to keep your expectations realistic, within the context of Fair work Act employment law. The majority of unfair dismissal complaints result in a decision in favor of the dismissing or demoting employer.
This is where an unfair dismissals representative can be very useful. An representative will be able to tell you whether you have a good case, a great case, or no case at all. Think this point through—and then talk it through with experienced representatives Next, if you do plan to proceed, gather the information and documentation that the FWC will want from you.
Unfair dismissal claim you will be required to provide:
- Your contact information;
- Your unfair dismissal representative contact information;
- The legal name (not trade name, necessarily) of your now-former employer; (what’s on your pay slip)
- Contact details for an individual working for your former employer to whom the complaint can be addressed;
- Your start and finish work-dates with that employer;
- The date your employer informed you of your demotion or dismissal;
- The reasons your employer gave you for your demotion or dismissal, including any supporting documentation;
- Your reasons for believing that the demotion or dismissal was unfair;
- Again, your preferred remedy for the dismissal.
Once you are ready with this information and documentation, you file your complaint with the completion and submission of the FWC’s Form F2.
Unfair dismissal claims must be lodged within 21 days
The form must be completed and submitted to the FWC no later than 11:59 PM (Melbourne time) on the 21st day after your dismissal took effect. It can also be delivered or posted to the Fair work Commission office in your area. Filing a complaint requires, also, the payment of a filing fee. As of this writing, the fee for an unfair dismissal complaint is $77.80.
Once the complaint is filed, the FWC will send a copy to your employer and organise a conciliation for resolution of the issues involved. A conciliation is a voluntary, telephonic discussion with an appointed “conciliator.” It isn’t as formal as a hearing and doesn’t require the submission of evidence. An outcome will be suggested, if it goes well, that may or may not be accepted by the parties.
Otherwise, if not or a conciliation is not requested, the complaint process winds on in a more adversarial manner. Your former employer has 7 days upon receipt of the application to respond. The employer may argue that the demotion or dismissal was fair—or it may object to the application.
An objection is an argument over jurisdiction
An objection is an argument over jurisdiction. That is, it’s an objection based upon the employer’s argument that the FWC lacks the legal authority to adjudicate the demotion or dismissal’s unfairness. This question can require a hearing of its own. If no conciliation held results in any agreed settlement, the FWC then holds its formal hearing as to the unfairness and merits of the demotion or dismissal.
The Unfair Dismissal Hearing
The unfair dismissal hearing held by the FWC is a formal legal proceeding. Rules of order and behavior apply. It is, at its core, however, an opportunity for you and your former employer to make your case and to present evidence concerning your demotion and dismissal. At the hearing’s start, a representative of the FWC known as the Associate will enter the room and take your name and other information. You may ask the Associate whatever questions you have about the procedure as needed.
When the other Fair work members enter and are seated, the Associate will knock on the back door, request silence in the room, and announce the hearing into session. During the hearing, the FWC members will allow you to speak, submit your documentary and other evidence, question your witnesses, and cross-examine your employer’s witnesses.
It can be awkward to have to face your former co-workers at such a hearing. Again, having an experienced unfair dismissals attorney by your side will go a long way toward simply feeling more comfortable in this unusual setting. The hearing can last a few hours—or a few days. It all depends upon the number of witnesses testifying and the number of issues under discussion.
Generally, the Fair work members do not give a decision on the spot at the conclusion of the hearing. Instead, the decision is normally delivered at a later time—although an oral final decision is possible.
Possible Unfair Dismissal Hearing Outcomes
So what possible outcomes may result from the Fair Work Commission demotion and unfair dismissal hearing? If the FWC decides that your demotion and dismissal was indeed unfair, your employer may be made to give you your job back. Alternatively, you may be awarded money damages.
These damages are generally equivalent to a set number of weeks of pay at your original pay-rate. For example, in 2017-2018, the median compensation awarded to successful complainants was $6,971, roughly equivalent to 7 weeks of pay. If your employer is unhappy with the result of the hearing, it may be appeal the outcome. An employer has 14 days to appeal a Fair Work Commission decision.
Conclusion to Is Demotion Better than Being Sacked?
AWNA can assist with your demotion and dismissal complaint in any number of ways, from the date of demotion to the date you decide to file an unfair dismissal complaint when you refuse that demotion. We’ve noted a few of the ways in which employment attorneys can maximize your odds of success, above.
We can help you explore your options, draft and file your complaint, prepare for and prosecute your hearing. We will defend against any appeal that a well-funded employer might file. When you’ve worked hard for an employer only to be demoted and sacked, you deserve fair representation from a legal expert who cares.
A Whole New Approach Pty Ltd. are Australia’s leading workplace advisors and commentators. AWNA are not lawyers. We are dedicated to representing employees only in unfair dismissal, harassment, and other workplace disputes. We are the workplace advisors that will help you move forward from a demotion or dismissal. If you feel that you have been discriminated against in your demotion or have been unfairly dismissed, contact us now to schedule your initial consultation.
Call 1800 333 666, all calls are confidential
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