When an employee is found guilty of serious misconduct, the first thing that comes to mind is dismissal. But is firing someone always the only, or the best option? In South African Labour Law, demotion is a lesser known but important alternative to dismissal that can offer a fair solution for both employer and employee. Let us unpack this and see how it works in practice.
What is demotion?
Demotion occurs if a change to an employee’s terms and conditions of employment results in a material reduction of the employee’s remuneration, responsibility, or status. In practice, this could involve moving someone to a lower-level job, cutting their salary, or taking away certain decision-making powers.
The Labour Relations Act Section 186(2)(a) defines unfair conduct by an employer relating to demotion as unfair labour practice. This does not mean that the employer is not permitted to demote an employee. Demotion must be done fairly, and to qualify, it must be justifiable on substantive grounds and must satisfy the requirements of due process.
Demoting an employee without his or her consent constitutes a breach of the employment contract, and the warning to employers is, therefore, not to unilaterally demote an employee.
Demotion as a disciplinary measure
The Labour Court and the Commission for Conciliation, Mediation and Arbitration (CCMA) have recognised that demotion can be a fair and reasonable disciplinary sanction in certain cases – if the employee agrees to it or if it is applied after a fair disciplinary hearing.
Demotion as a disciplinary measure is typically used in circumstances where dismissal is justified but, due to mitigation factors, the employer decides not to dismiss the employee (Arris vs Afric Addressing (Pty) Ltd 1995/5BLR525CCMA).
The Commissioner in this matter stated that “A unilaterally imposed demotion can… only be fair if it’s offered as an alternative to a 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, ie, demotion. In such a case, if the employee accepts the demotion, it is no longer unilateral but agreed between the parties.”
The dilemma many employers will struggle with is in cases of serious misconduct, which goes to the core of the relationship of trust between the parties. The question would be whether the employer would still want the employee in its organisation. In practice, therefore, demotion as a disciplinary measure would be more readily applicable in instances of misconduct not serious enough to justify dismissal. The employer will have to believe that the employee can still add value to the organisation in a lesser role.
In the matter Van Niekerk vs Medicross Healthcare Group (Pty) Ltd (1198)8BLR1038CCMA, the CCMA found that since demotion is a disciplinary action, consultation and counselling should take place before the demotion is implemented. In the absence of a fair reason and fair procedure, the demotion was held to amount to an unfair unilateral alteration of the terms and conditions of the employment. In a nutshell, therefore, the following procedural requirements to legally demote an employee after misconduct should be in place:
- Hold a fair disciplinary hearing and give the employee a chance to respond to the allegations;
- Consider all options, including whether the employee can improve or be placed elsewhere in the organisation;
- Communicate clearly why demotion is being considered instead of dismissal;
- Give the employee time to consider the sanction of demotion as well as the right of appeal or internal review (if company policy allows for it).
In conclusion
Demotion is recognised as a valid disciplinary measure, but only when used fairly and with the correct procedure. For employers, it can be a smart move to keep valuable staff whilst still addressing misconduct, and for employees, it provides a chance to rebuild trust without losing their job altogether. If you are unsure of your rights and obligations, it’s always a good idea to consult a Labour Law expert or legal advisor.
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