Termination or Demotion?

Too often, trying to please everyone inflicts the reverse result.
One instance in Workplace Law where this painful reality can play out is in the case of demoting underperforming employees.
The practice sounds reasonable enough: a staffer fails to meet the requirements of their role and is duly demoted to a lesser position, with reduced pay and obligations.
For the flagging worker, it would appear to be a preferable option to getting the sack. For the employer or business owner, it would appear to be a generous expression of loyalty.
Yet how it can backfire.
Unless there is express provision for demotion in the workplace contract, employers play a dangerous game when they choose to demote rather than terminate.
In the absence of any agreed framework between the parties, demotion can often be interpreted as unfair termination. This can leave the employer exposed to significant legal costs, not to mention a decent-sized payout.
In one case recently before the Fair Work Commission, a sales employee was demoted after mistreating a client and costing the company a six-figure sum of annual revenue.
After a period of stress leave, the employee asked to return to work in a lesser role. His wish was granted – on a commensurately lower salary and with access to a less impressive work vehicle.
The employee lodged a claim before the Commission, arguing he’d effectively been terminated on the basis of his lower salary. The Commission agreed and awarded him a payout of nearly $40,000.
Sometimes the kindest and most considerate response can put business owners at significant risk. With decades of experience in Workplace Law, Tonkin Drysdale Partners can help employers to navigate these difficult decisions and determine the most constructive way to resolve them.
If you require advice about Workplace Law, please contact Dominic Tonkin from our Employment Law team.