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Demotions and the unfair dismissal provisions of the Fair Work Act

When considering changes to an employee’s employment, employers need to be mindful that significant reductions in remuneration or duties may constitute a “dismissal” under the Fair Work Act 2009 (Cth).

When considering changes to an employee’s employment, employers need to be mindful that significant reductions in remuneration or duties may constitute a “dismissal” under the Fair Work Act 2009 (Cth) (the FW Act).

The unfair dismissal provisions of the FW Act make it clear that a demotion will not automatically constitute a dismissal – as long as it does not involve a significant reduction in the employee’s remuneration or duties and the employee remains employed with the employer. However, if these conditions are not satisfied, then the changes made may constitute a “dismissal”.

This distinction was the subject of a recent unfair dismissal application determined by the Fair Work Commission (FWC). In Williams v Valley Healthcare Group Pty Ltd [2023] FWC 614, the FWC was required to consider whether or not changes to the employee’s duties and reporting line amounted to a “demotion” and, if so, whether it amounted to a constructive dismissal and allowed the employee to claim that she was unfairly dismissed.

The employee had been employed as the employer’s HR Manager, primarily focusing on Human Resources and Compliance for the employer’s group of companies since June 2021. In this role, she initially reported to the employer’s General Manager, which then changed to the Managing Director and Owner after the General Manager resigned.

In September 2022, the employee was advised that her position was being modified so that she would no longer be required to be the HR Manager for a particular section of the business and she would now be reporting to the General Manager of the section of the business in which she was continuing as the HR Manager. The employer submitted that this was part of an organisational restructure and succession plan.

The employee was also advised that she would no longer be involved in any recruitment activity. According to the employer, management of the recruitment team was a “trial” implemented in July 2022, which the employer decided to end following complaints from the recruitment team about the employee’s management style and lack of knowledge about recruitment. The employer also submitted that the employee was constantly ignoring or questioning management directives and would become argumentative when directed to do things that she did not agree with.

The employee made a formal complaint, alleging that this action was a significant change to her role in respect of which she had not been consulted. When the employer refused to reverse the changes, the employee resigned citing a repudiatory breach of her employment contract that she considered to be a constructive dismissal.

However, the FWC did not agree with the employee, ultimately finding that the employee voluntarily resigned and that she was not constructively dismissed.

In so finding, the FWC noted:

  • the employee had made complaints about her workload – her own witness had given evidence that the employee’s workload had doubled when another employee left the business and that it was too big for one employee;
  • in light of the above, it made sense that the director would reconsider the “trial” workload which had been placed on the employee. In this regard, the FWC considered that the director would be failing in his duty as a manager if he did not take steps to alleviate her workload after she had made such a complaint;
  • the employee had not been demoted, as her title was not changing and there was no reduction in her hours of work or her salary. Whilst she was going to report to a new General Manager due to changes at the senior level, this did not constitute a constructive dismissal; and
  • while the director could have dealt with the situation better by discussing the proposition with the employee directly before making a final decision, it was unlikely that the employee would have accepted the changes anyway, considering the evidence of her constantly challenging the director and also berating him for a     previous decision he had made in relation to another employee.

The FWC therefore dismissed the employee’s unfair dismissal application.

Lessons for employers

Whilst the employee in this matter was unsuccessful in claiming that she was dismissed, it does serve as a reminder to employers that a “dismissal” for the purposes of the unfair dismissal provisions of the FW Act is not always limited to a straightforward dismissal by the employer.

Certain action taken by an employer – if not accepted by the employee – which will result in a significant change to an employee’s duties and remuneration, may constitute a dismissal and expose an employer to claims of unfair dismissal.

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.


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