DEMOTION - 16.11.2012

Demotion as a disciplinary sanction

The usual suspects

When it comes to disciplinary sanctions, most employers usually only use formal written warnings or summary dismissal (where the employee’s misconduct is sufficiently serious). However, there is a third possibility: demotion. In legal terms, this is “the act of reducing an employee’s status or contractual entitlement”.

Not an automatic right

However, although demotion as a disciplinary sanction is permitted by the statutory ACAS Code of Practice on Disciplinary and Grievance Procedures, implementing it is not an automatic right for the employer.

Tip 1. To be able to use it, you must have retained the specific contractual right to demote in the employee’s contract of employment (see The next step). If not, this option must not even be considered.

Tip 2. A demotion clause should also permit a comparable reduction in the employee’s salary for the period of the demotion, or you’ll have to pay them the same money for a lesser role.

A word of warning

Even where this specific right has been properly retained, you can’t just demote an employee simply because you feel like it or it seems like the right thing to do. This would be a breach of the implied duty of mutual trust and confidence, thus giving the employee the right to resign and claim constructive dismissal.

Tip. Instead, you must think carefully before going down this route and be absolutely sure that:

1. You can justify your actions; and
2. The demotion is reasonable in all the circumstances, e.g. there were strong mitigating factors and the employee deserves a second chance.

The “benefits” of demotion

But why would you ever resort to demotion? Indeed, the tribunal has frowned on this particular disciplinary sanction in the past. Whilst it’s true that historically demotion has been seen to be unfair, in the current financial climate the tribunal may view things differently - after all, it allows the employee to keep their job and you can retain their skills.

Tip 1. Demotion as a disciplinary sanction should never be the norm. It must be the last resort before dismissal and only done in exceptional cases where the circumstances warrant it.

Tip 2. It must also be imposed temporarily, never on a permanent basis. If you go with the latter, the tribunal will almost certainly find this decision to be unfair.

Tip 3. Finally, don’t forget that under the Code employees have the right to appeal against any disciplinary sanction imposed on them. This applies to demotion too. The simple fact that you’ve retained the contractual right to invoke this particular decision does not override the overall requirement for fairness.

For a free sample demotion clause (PS 14.21.07A) and for a free sample disciplinary demotion letter (PS 14.21.07B), visit http://personnel.indicator.co.uk.