When demoting an employee amounts to a dismissal

When demoting an employee amounts to a dismissal

A recent Fair Work Commission decision has found that the demotion of an employee amounted to a dismissal for the purposes of the Fair Work Act 2009.

An employee received a final warning from his employer for not performing a blood alcohol test on members of his team prior to taking them to a site visit. The formal warning drafted by the employer stated that the alcohol consumption ‘should have been identified as a significant risk level of consumption’. Two of the employee’s direct reports had consumed 29 drinks between 6.30 pm and 10pm at a local bar the evening before reporting to work.

The employee had been employed as a Service Supervisor for 3½ years with FLSmidth, by not performing the BAC testing on his staff before the site visit constituted a breach of the organisations alcohol policy and the employer received the final warning and in addition was demoted from Supervisor to a lower paying position of Mechanical Service Technician (Experienced).

After being forced to work in the demoted role, the employee made an unfair dismissal application to the Fair Work Commission.

The employer argued that the demotion was:

  • lawful and authorised by the employees’ contract, arguing that the location clause in the contract stated that the employee could be required to perform other duties and assume other responsibilities and or perform a different role and;
  • an implied term of the employees’ contract and a well-known and unwritten express term of employment, as a FLSmidth Services Supervisor can be demoted by unilateral decision of FLSmidth without termination at the instigation of FLSmidth or suggested by the employee.

The Fair Work Commission rejected the arguments put forward by the employer and held that where an employee is demoted and elects to remain employed by the employer, they can still be dismissed within the meaning of Section 386 of the Fair Work Act in circumstances where the demotion involves a significant reduction in the employee remuneration or required duties.

The commission held that the demotion resulted in a significant reduction to the employee’s remuneration and the employer’s duties. as a result of the demotion the employee no longer supervised employees or had direct client contact.

The commission held that the employment contract did not authorise the demotion as there was no unqualified right within that contract for the employer to require the employee to perform a different role within the organisation. The only clause the commission found in the contract to relate to such a demotion was a right conferred in the contract to be exercised to meet the company’s business opportunities from time to time.

The Fair Work Commission held that while the employee had expressed a willingness to accepting the demotion of the technician role, the commission found that there had been no discussion with the employee regarding changes to the employees’ remuneration. As a result, the commission found that the employer had not made an offer of demotion that the employee could have accepted because there was no certainty as to the terms of employment under the demotion.

In conclusion, the Commission held that the primary contributing factor to the employee’s demotion was the actions of the employer and it was therefore at the employee’s initiative, resulting in a dismissal as per the definition outlined in Section 386 of the Fair Work Act [2009].