Background

The employee commenced employment at the NSW engineering company in 2010 as a qualified Boilermaker. In 2013, the employee was promoted to the role of Projects Co-ordinator.

From October 2017, the business alleged the employee’s performance deteriorated by regularly arriving late to work; leaving early; and not appearing to focus on their job. In March 2018, the business raised concerns with the employee after they had allegedly rudely spoken to a client. The business alleged the employee’s commitment to help his wife’s business was the cause of the unsatisfactory performance.  

In April 2018, the employee advised the business they were resigning to work full time with their wife’s business and enquired about receiving a redundancy payout. However, the employee allegedly changed their mind after being informed a redundancy payout was not applicable. During the conversation, the employer informed the employee that any continuation of employment would have to be in a Boilermaker role. The employee filed an Unfair Dismissal Application in May 2018.

The Decision

When determining whether the demotion of the employee from Project Co-ordinator to Boilermaker met the definition of a dismissal under the Fair Work Act section 386, the Commission considered the following:

• 20% decrease in remuneration
• Loss of company vehicle and phone
• Move from a staff position to a trades position

The Commission found there to be a significant reduction in the terms and conditions of employment and as such, constituted a demotion. The Commission noted the employee was entitled to have allegations of poor performance put to them in writing; and that “to take away his role without a proper investigation was blatantly unfair”.

Therefore, the Commission found that the demotion amounted to a harsh and unjust dismissal.

Lessons for Businesses

A demotion involving significant reduction in duties or remuneration may constitute a ‘dismissal’ under the Fair Work Act. When making performance management decisions, a business should ensure procedural fairness in order to mitigate the risk of a successful unfair dismissal claim.

How we can assist

Under current employment legislation, costly consequences await organisations found to be recruiting, managing or terminating staff incorrectly. Attend our Managing Termination, Redundancy and Unfair Dismissals to increase your knowledge of counselling and discipline processes, and how to best manage an unfair dismissal claim.

Written by Jessica Kelly, Graduate Workplace Relations Advice Line Advisor

Fair Work Commission Decision (U2018/4540)