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Can HR legally demote an employee?

Can HR legally demote an employee?

Whether an employer can demote an employee depends mainly on the employment contract terms. If the employee agrees in the contract that they could be demoted and have their pay reduced in certain circumstances, a court could find that contract to be binding. Without any such agreement, however, the demotion of an employee would more likely be treated as a constructive dismissal if it is a fundamental and unilateral change to the employment agreement.

  1. A court may examine the following factors when assessing whether a demotion is a constructive dismissal:
  2. Whether or whether the employee is currently in a lower position in the company's hierarchy or reporting chain
  3.  If there have been significant changes to the job,
  4.  If the demotion would be humiliating or unpleasant,
  5.  If the employee's responsibilities are delegated to someone else,
  6.   If there is a change in remuneration as a result of this,
  7.   If it has the potential to affect future advancement opportunities, and
  8.   If the employer acts dishonestly.

There will be no single factor that will determine the outcome. An employment lawyer can determine if these conditions are met, resulting in a constructive dismissal.

In Canada, a demotion would be considered 'essential' to the terms and conditions of employment and, as such, would necessitate notification. The nature of the change, which can encompass a variety of aspects, plays a significant role in determining if the change is fundamental. Even if an employee is constructively dismissed, they may not be allowed to depart and sue for damages. There may be a legal need to stay in a position to mitigate their losses. Every case is unique, and employers should seek professional counsel before making adjustments.

Changes that could be construed as a demotion should be carefully considered by employers. If job performance is the reason for the probable demotion, employers should address it first through a performance improvement and assessment system rather than a unilateral demotion. Any future modifications to the job should be discussed with the employee, and feedback should be obtained. If a new or different position is being offered, make sure the employee receives a work description and is given the time to ask questions about the job's expectations, responsibilities, and other difficulties. If no alternatives are available, a notice of the change should be considered.

HR leaders should plan ahead of time, even if they believe valid reasons for a demotion. Employees are understandably sensitive to any interference with their professional responsibilities. Demotions should not be used as a replacement for good performance management.