The demotion of an engineering company employee was found to equate to termination of his employment, despite the employee continuing to work for the company.
The Fair Work Commission heard the employee was demoted from a senior supervisory role to a technician role, following allegations of misconduct against the employee. The change in position saw the employee’s pay cut by 9% and significant alterations to his duties.
In defending the employee’s unfair dismissal claim and the demotion, FLSmidth Pty Limited contended:
- the demotion was authorised by the terms of the relevant employment agreement; and
- it was an implied term of the employee’s employment agreement that he may be demoted, without this equating to a termination at the employer’s initiative.
The Fair Work Commission rejected these arguments, finding that a significant reduction in pay or duties is enough to constitute a dismissal and relying upon the following factors:
- the employer unilaterally reduced the employee’s pay by 9%;
- the employee’s duties were changed significantly, from a supervisory, client-facing role, to a technical, “on the tools” position; and
- the relevant clause in the employee’s employment agreement was restricted to circumstances where the employer altered a position to pursue business opportunities (not for disciplinary reasons or other broader operational reasons).
Employers should be aware that demoting an employee can amount to a termination of employment and that accordingly, employees may be able to make an unfair dismissal or general protections claim (involving dismissal) in the Fair Work Commission, despite an intended continuation of the employment relationship.