Can I Demote an Employee?

Jim Boyle

January 13 2020

In the workplace, a promotion is something for employees to strive for and an opportunity for employers to reward workers who demonstrate exceptional performance. However, what happens when an employee is promoted and does not meet the expectations that come with their new role? When can an employer demote the employee to their previous position when it becomes clear the employee is not the right fit for the promotion?

This post explores whether employers are legally able to demote employees, and if so, under what conditions.

Can an employer legally demote an employee?

Typically, a demotion entails placing an employee in a position that is lower in the organizational hierarchy than the position to which they had been promoted. This often entails stripping managerial authority and a corresponding loss of pay and prestige. Generally, unless the employee consents, a demotion can amount to a constructive dismissal of the employee, which triggers the employee’s entitlements to termination pay under employment standards legislation and the employee’s employment agreement.

In certain circumstances, however, an employer may demote a promoted employee without the employee’s consent and without triggering a constructive dismissal. To legally demote an employee, the employer would need to have made the initial offer of promotion conditional in some way. Should the promoted individual fail to satisfy the agreed upon conditions, the employer would have a legitimate basis to demote the worker.

Examples of conditions that an employer could include with a promotion or a job offer could include completing specified training or achieving certain performance milestones by a certain date. The offer of employment could also stipulate that the promotion will be subject to a probationary period during which period the employer will assess the employee’s suitability for the position.  

In these instances, if the employee fails to satisfy the conditions of the promotion within the specified time period, or if the employer determines at the end of the probationary period that the employee is not suitable for this position, the employer can justify their decision to demote the worker back to their previously held position, or a position that is reasonably commensurate to their previously held position in terms of responsibilities, salary, and position in the organizational hierarchy.

What is an example of an inappropriate demotion?

If an employer attempts to demote an employee without having clearly stated the conditions that would result in a demotion in the employee's employment agreement or promotion offer letter, this could be considered a fundamental and unilateral change to the employee’s employment agreement, which could lead the employee to file a constructive dismissal claim against the employer. For this reason, it is essential that employers establish a written agreement for any specific terms or conditions in an offer of promotion.

To avoid employees taking legal action against the business and to help foster positive relationships with employees, employers should always be very clear and candid regarding and conditions an employee must satisfy to remain in their promoted position.

Need help with contract creation for your employment and promotional offers?

At Peninsula Canada, our team of expert advisors offer a wide variety of HR and health & safety services, such as contract & documentation creation and revision. We ensure companies are properly protecting themselves via their written agreements and policies.

We also provide employee management consulting, so if your company is considering demoting an employee, our HR advisors can assist you throughout the situation. Call us today at: 1 (833) 247-3652 

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