When can HR legally demote an employee?

Offering an employee a promotion is usually a celebratory occasion

When can HR legally demote an employee?

Offering an employee a promotion is usually a celebratory occasion. Rewarding hard work, striving for enhanced productivity and showing your support for their abilities.

However, if this happy event turns sour – and HR comes to the decision that a recently promoted employee needs to be demoted – there are certain legal pitfalls to beware of and cautionary steps to keep in mind.

We spoke to Matthew Certosimo, partner at ‎Borden Ladner Gervais LLP, who gave us his take on the issue.

“The analysis begins with the terms and conditions of the employment contract” he told HRD Canada.

“The employment relationship in Canada is contractual in nature, so whether with respect to the original position of hire or a subsequent promotion, a court would likely seek to determine whether the employer had the right to act as it did under the contract.”

Certosimo went on to say that, if an employer has made the offer conditional in some way, either the offer of the position or the offer of employment, then the employee’s failure to satisfy that condition may justify the employer’s decision to demote the employee back to their former role or to end the relationship all together, depending upon the circumstances.

“For example,” he continued, “an employee might be promoted to a position subject to that employee getting certain regulatory approval or licensing or training, by a certain date. An employer would be within their rights to demote that employee back to their prior position if the employee doesn’t meet the condition by the date in question.”
Similarly, an employer might want the initial period of promotion to be probationary. such a term allows the employer to test drive the employee in the new role, to see if the employee has the ability to do the job.

“In Canada, if employers want to have a probationary term of employment, it has to be an express term; it will not be implied. if an employer expressly sets out a probationary term and condition, a discretion to return the employee to the pre-promotion role could be retained; assuming the employee is given a fair shot at the role in question, the employer would be within its rights to, in a sense, demote the employee, if he or she is not suitable for the promotion.”

“On the other hand, if employers fail to put conditions clearly in place, in what technically amounts to an amendment to the contract offering the promotion on specific terms and conditions, they may run into trouble. If the demotion amounts to a fundamental and unilateral change in the employment agreement, then the employee may have a constructive dismissal claim.”

From a best practices perspective, employers are well-advised to get agreement on the conditions placed on the employee at the time of promotion (or hire, as the case may be). Employers should be upfront and clear about any conditions to be met to remain in the promoted role in an amendment to the contract, so that the parties know what is required from the outset and the employer can rely fully upon them.

“On a human level, being upfront with each other helps to avoid misunderstandings,” concluded Certosimo. “The law governing the employment relationship essentially reflects that policy perspective. If employers are not upfront with employees, or the conditions imposed are illegal, then, to state the obvious, legal challenges are much more likely.”

If you think demoting an employee is a contentious issue, what about a refusal to participate in dangerous work? Find out more here.


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