We are asked by clients; can I demote an employee? It can seem an attractive option, but it’s not without its legal risks. Demotion should be approached by employers and HR professionals with a degree of caution as an option in managing the workforce. As a potential sanction, it represents a significant change to an employee’s employment arrangements and one that they may be less than happy to accept.
Demotion can take various forms including a change in job title, role, duties, and subsequently salary.
An employer may look to demote an employee for a number of reasons, for example:
- Work performance. You may look to demote an employee as an alternative to dismissal. Usually after going through a performance management procedure, if stipulated in a contract of employment as an alternative sanction;
- As a disciplinary sanction. An alternative to dismissal in a case involving allegations of workplace misconduct and/or where the employee has substantial length of service;
- Changes in economic circumstances may result in a need to reorganise the employer’s business, including seeking to demote certain individuals.
There are potentially legal pitfalls associated with demotion. It can mean a significant variation to the employee’s contract of employment. A change in job title or role with or without accompanying changes to duties and responsibilities is likely to mean a major change to an employee’s terms and conditions of employment, especially if there is a change in seniority or job status of the employee.
What If The Contract of Employment Allows Demotion?
You cannot demote an employee for no reason at all. Therefore, in order to demote an employee, you should expressly reserve the right to do so in the Contract of Employment. The contractual provision should lay down the circumstances that it will be used, for example, as an alternative to dismissal when dealing with poor performance or misconduct. On this basis, you should only demote an employee in accordance with the circumstances that are set out in the contract of employment.
Should We Consult?
Consultation and agreement should be sought before implementing a change in role and/or job status, if you are looking at a company restructure. As a demotion is likely to amount to a substantial variation to an employee’s contract of employment, individual consultation and agreement should take place before implementing any change in role and/or job status.
If the employee refuses to accept the demotion you may need to consider dismissal. In which case you will need to warn the employee of as part of the consultation process. Alternatively, you may need to terminate the existing contract of employment and offer re-engagement on the new terms.
What Are The Potential Legal Risks?
Where the employee has over two years’ service, they will have unfair dismissal rights. If you were to decide to impose the demotion without consultation and agreement or you attempt to apply undue pressure on the employee to agree the change, it may result in them deciding to resign and claim constructive dismissal.
Employees who are dismissed for refusing the change may have a claim for unfair dismissal and potentially breach of contract. However, where an employee has insufficient service to claim unfair dismissal, they may still try to claim for wrongful dismissal in certain circumstances.
A demotion may also be the basis for a claim for discrimination contrary to the Equality Act 2010. If it can be linked to a protected characteristic such as race, gender, sexual orientation, disability, age, or religion. An employee does not need to fulfil any length of service to be able to make a claim of discrimination.
Any Advantages to Demotion?
However, when handled carefully, demotion is a useful option to you depending on your circumstances. Other considerations you will need to make is the potential impact on staff moral. Perhaps consider more effective options in managing your workforce. You may wish to consider offering additional support, training or mentoring in a workplace performance situation. This would be considered safer and may yield a much better outcome for both you and your employee.
However, if you wish to discuss your options and ask us ‘can I demote an employee?’ Please contact us on 01706 565332 or drop us an email and we’ll get right back to you.
Metis HR is a professional HR Consultancy based in the North West of England supporting clients across the country. We specialise in providing outsourced HR services to small and medium-sized businesses. Call us now on 01706 565332 to discuss how we may help you.