Demotion can be unfair dismissal

DEMOTING or moving an employee ‘sideways’ can be grounds for unfair dismissal.

Clayton Utz workplace relations partner Joe Catanzariti said a case involving the Australian Workers Union and Rail Services Australia showed why employers should be very careful about demoting an employee.

While the Federal Industrial Relations commissioner put the matter out for mediation, he found there was a “persuasive argument that the employee had been terminated when his employment contract was breached by the reduction in pay”.

However, even moving an employee into a new position, without reduced pay, could be deemed a case for unfair dismissal.

Mr Catanzariti said an argument could be made that the move caused the employee embarrassment.

“Such moves can often be a device to get an employee to resign anyway,” he said.

The problem comes from the structure of employment contracts.

Mr Catanzariti said if the employment contract did not allow for demotion or movement within the organisation, the employee could sue for unfair dismissal because his or her employment conditions had changed.

While the case was handled in the Federal Industrial Relations Commission it could be used as a precedent for State-based award cases.

Mr Catanzariti said Clayton Utz was treating the judgement as a general principle.

He said the law firm was including clauses in the workplace contracts it prepared to allow for movement or demotion.

Combined Small Business Associations of WA president and industrial relations consultant Oliver Moon said employers had to be very careful about stated or implied terms within an employment contract.

“It’s really a case of not what you do but what you can get away with,” Mr Moon said.

“However, with people being better educated and knowing more of their rights, what you can get away with is reducing.”

Mr Moon said it was unlikely such unfair dismissal actions would affect many small businesses.

“There’s really not a lot of scope for demotion in a small business,” he said.