Legal Eye: Can you legally demote an employee?

When an employee isn’t performing in a specific role, can HR move them back into a lesser position? HRM gets the legal insight.

Legal Eye: Can you legally demote an employee?
Sometimes an employee excels in one position but can’t succeed in another. Whether it’s the Peter Principle of being promoted above ability level, or a mismatch between skills/personality and role requirements, it’s a sticky situation for HR.
 
“In the same way you need just cause for dismissal you need just cause for demotion or you’re getting into potential constructive dismissal,” employment lawyer Lisa Goodfellow from Miller Thomson said. “You have to show that you made your expectations clear to them, then show that your expectations are reasonable and necessary for the position and that the employee has failed to meet those expectations despite being provided adequate support and training.”
 
Organizations will often choose to terminate an employee instead of demoting them, but if the employee has valuable skills and experience then often it’s in the company’s best interests to keep them. Like proving just cause for dismissal, HR should document everything, which should include communication to the employee about what requirements they’re not meeting, what time and support they’re being given and that also crystal clear communication that if the employee doesn’t meet the performance standards required, then they will be demoted.
 
What qualifies as a reasonable amount of time and support could differ, as will what is required to prove the individual is not meeting expectations. From failing to meet specific productivity objectives, to failing to resolve disputes, there are a range of possible scenarios, and a range of solutions to try before demotion should be considered.
 
“Some people have trouble putting on that management hat, which is where training and courses addressing that could help, but if you have you tried that and it’s still not working, you can justify removing those responsibilities,” Goodfellow said. “If you demote someone and you can’t establish just cause for demotion it’s going to be constructive dismissal.”
 
Documenting all the steps you took to support the employee is a good defensive step, but the right approach with the individual could help your organization avoid a lawsuit all together. Sometimes individuals will be relieved to step back to a lesser role, but regardless of their preferences HR should take a soft, counselling approach at first.
 
“Discipline can be very heavy handed,” Goodfellow told HRM. “With training and coaching, you’re more likely to see positive change. Really consider what other forms of support you could provide.”
 
If the individual feels humiliated or ashamed of the demotion they’re likely to leave anyway, and possibly bring a suit against the organization. While there is not a lot of case law regarding demotion, there have been cases where the employer has successfully defended the decision. Many were unionized workplaces where the job requirements were clearly defined and all the steps taken were well-documented. Ensuring those two steps are taken will go a long way towards protecting your organization from a constructive dismissal suit.
 

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