Demotion as a disciplinary action

A demotion is when an employee’s status and/or remuneration is lessened. Although rarely used, employers sometimes elect to demote employees after a disciplinary inquiry was conducted, where the dismissal, as a disciplinary sanction, would have been justified.

Demotion as a Legitimate Disciplinary Sanction

Our Courts and the CCMA have recognised demotion as legitimate, subject to specific requirements. Demotion is considered a legitimate sanction as an alternative in cases where dismissal would be equally appropriate. The CCMA case of Sityana & Mane vs Valpa Easi Gas addressed the question of demotion as a disciplinary sanction. The Commissioner confirmed that demotion is an acceptable form of disciplinary sanction.

The Commissioner, however, cautioned employers in applying the same, stating, “Since it effectively entails a change of the employee’s terms and conditions of employment, it is self-evident that demotion should be reserved for cases of serious misconduct.  In my view, the test for whether an employee was fairly demoted is akin to that used in establishing whether a dismissal was fair, subject only to the consideration that the consequences are slightly less serious for the employee.”

Balancing Fairness and Potential Consequences

Section 2 (1) (b) of Schedule 7 of the Labour Relations Act recognises demotion as a possible ground for an unfair labour practice. In the CCMA case of Arries vs Afric Addressing (Pty) Ltd, the Commissioner asserted that “A unilaterally imposed demotion can … only be fair if it is offered as an alternative to dismissal; in other words, the sanction of dismissal is found to be appropriate, but the employee is offered the opportunity of accepting a lesser penalty, i.e., demotion. In such a case, if the employee accepts, the demotion is no longer unilateral, but agreed between the parties.”

When a final written warning is considered to be too lenient and dismissal too severe, demotion could be more appropriate and is considered to be of value as a disciplinary sanction. Employers should take note of the potential consequences of demotion, in so far as the effect it could have on the employee’s morale and any subsequent resentment of the employer. 

The Complexities of Demotion as a Disciplinary Sanction

Demotion often leads to an employee resigning and claiming constructive dismissal on grounds of having been demoted. However, despite this, depending on the circumstances and the individual parties involved, as a form of disciplinary sanction, demotion may be appropriate, notwithstanding the difficulties associated with it.

Demotion may be given particular status as a recognised disciplinary sanction in a disciplinary code. However, it remains at the disposal of employers as a disciplinary sanction even if the employer has not drafted it into a formal disciplinary code.

A demotion cannot occur before the employer follows a fair procedure, and the employer is not allowed to enforce a demotion upon an employee in a prejudicial manner. Before the demotion is enforced, the employer must consult with the particular employee and allow them to make representations. The employer has to follow a fair disciplinary procedure and provide the employee with the option of demotion as an alternative to dismissal. If an employer fails to follow the consultation route, it may be unfair labour practice.

Case Study

In Van Niekerk v Medicross Health Care Group (Pty) Ltd, an employee was demoted from a managerial position to a clerk.  After considering the evidence, the CCMA ruled that the employer should have consulted and counselled the employee before the employee was demoted. In the circumstances, the CCMA found that the employer’s action amounted to a unilateral change in the terms and conditions of the employee’s employment. The employer was accordingly ordered to reinstate the employee to her former position as a manager.

As becomes evident by the above, demotions should be applied as the exception to the standard. Furthermore, employers must also consider potential issues with consistency that could arise when demoting an employee, however, on the rare occasion where demotion could be appropriate and applicable in the circumstances, employers must follow the correct process.

Should you require assistance or advice regarding demotions as a disciplinary sanction please contact Invictus Group on 0861 737 263.