Demotion – Correction or punishment?

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In order to fully comprehend the labour law requirements and imperatives associated with the practice of demotion, one has to adopt a “back to basics” approach and consider the fundamental aspects underpinning the establishment of the employment contract.

When the particulars of the employment contract were negotiated between prospective employee and prospective employer, these parties were on equal footing from a party participant perspective. The insubordinate nature of the employment contract would only take effect once the fundamentals of the contract have been agreed to and the contract is duly signed off.

Since agreement, and thus a meeting of minds, was the fundamental tenet underpinning the agreement reached in this regard, such tenet remains in operation throughout the life of the employment contract. Any change in the terms and conditions of employment, which is contemplated by either party, can legally and fairly only be implemented with the express consent of both parties – when resorting to demotion in order to bring about a change in the terms and conditions of employment the very same principles apply.

This now raises the question: What change in terms and conditions of employment constitutes demotion?

There exists a common belief that demotion is restricted to where a reduction in remuneration happens. Relevant case law however proved this perception wrong.

In the Labour Appeal Court case: Nxele v Chief Deputy Commissioner Corporate Services & others (LAC) 2008 the following principles were established as far as demotion is concerned:

  • Demotion without the employee’s consent constitutes an unfair labour practice (ULP).
  • Transferring an employee to a lesser position without his/her consent constitutes demotion and consequently an unfair labour practice (ULP) in terms of Section 186(2)(a) of the Labour Relations Act (LRA). Imposing such demotion on an employee may result in a successful claim of constructive dismissal in terms of Section 186(1)(e) of the LRA on the basis that it made continued employment intolerable.
  • In determining whether demotion occurred where an alternative position is offered to an employee, aspects such as status, prestige, and responsibilities, apart from remuneration, are relevant considerations.
  • In common law, demotion without the employee’s consent is unlawful.


In the Labour Appeal Court case: Builders Warehouse (Pty) Ltd v Benade (LAC) 2005, a demoted position was offered to an employee, who, as result of ill health, was unable to perform in his current position. The demotion was offered as an alternative to dismissal on account of incapacity. The employee formally agreed to the demotion but disputed the fairness of the implementation of the demotion. When the dispute was referred to the CCMA the employer raised a jurisdictional point, claiming that in consequence of the agreement reached, the CCMA has no jurisdiction to entertain the matter.

In this case the LAC found as follows:

  • While the fact of the demotion is not in dispute, the fairness of its implementation could be a basis for dispute.
  • The agreement reached does not raise a justifiable jurisdictional dispute.

In the Labour Court case: Minister of Justice and Department of Justice v Bosch, Dawie N.O, Wepener, Christo & The General Public Service Sectoral Bargaining Council (LC) 2005, the following pronouncements were made regarding demotion:

  • At common law, demotion without consent constitutes a repudiation of the employment contract.
  • Interpretating Section 186(2)(a) of the LRA within proper context, implies that when executed fairly, demotion is legally permissible.
  • Demotion means that something to which the employee is entitled is taken away or withdrawn. That which is withdrawn could include perceived status.

What do we learn from the jurisprudence summarised above?

  • An employee can only be demoted fairly when the demotion has been agreed to by the employee.
  • Once agreed to, the demotion must be implemented fairly and in compliance with both the letter and spirit of the agreement.
  • Merely keeping the employee’s remuneration unchanged upon demotion, does not necessarily justify the demotion. Aspects such as status, prestige, responsibility, and promotional prospects being adversely affected by a downgrade of the position or the repositioning of the employee, may constitute demotion and unfairly so. This is despite no negative impact on remuneration.
  • A demotion can never be justified when implemented unilaterally.


What are the possibilities of resorting to demotion in a fair and legally justifiable manner in the workplace?

As a remedy where the “Peter principle” played a role:

In consequence of the “Peter principle” an employee is promoted beyond his/her level of competence. Usually, such promotion happened for all the right reasons and there was no intention to set the employee up for failure. It boiled down to an error of judgement both on the part of the employee and the employer.

The result is that the employee finds himself/herself out of depth and inherently unable to perform as expected in the position he/she was promoted to. Very often, such employee excelled in his/her previous position, since it was a comfort zone, and the requirements of the position were squarely within the employee’s grasp and level of competence.

Invariably, it is as result of the excellent performance of this employee in the former position that the employer decided to “reward” the employee with the promotion, not realising that the employee would not be competent in the next level position. In some cases, it may have been too early or premature to promote the employee, as he/she still lacked readiness.

It may also be that, in some cases, the employee’s competence make-up is such that he/she is simply not cut out for delivering what the next level position requires. Example – The employee may have been an excellent salesperson, shooting the lights out time and again, but when promoted to a managerial position requiring the managing of sales consultants, he/she lacked the supervisory and managerial skills and acumen required by the position.

In these circumstances an agreed demotion to a former position at lower organisation level may be a good remedy, first and foremost for the employee, returning to a comfort zone where he/she can excel again and reap the benefits materially and emotionally of excellent performance. Such agreed demotion will also be beneficial to the employer benefitting from having the correct “jockey” on the “horse” and so enhancing productivity. Agreement to the demotion in these circumstances should be a matter of formality in the circumstances, since it is a sensible alternative to a termination of employment on the basis of incapacity.


As a disciplinary sanction

Although this particular application of demotion is legally and fairly permissible provided that it is resorted to in consequence of mutual agreement, I am personally not propagating this option from an employee relations point of view.

In practice we often find that this option is resorted to in order to provide the employee, facing dismissal, the option of a downgrade in position (with or without a reduced remuneration) as a means to stay employed.

Noble as this gesture may appear on face value, it has particular contra-productive consequences which upset sound employee relations on both personal and collective level in the long run. Let me explain:

Contrary to where the “Peter principle” finds application, demotion within this context, often involves a delinquent employee, capable of performing at least adequately in his/her position, being demoted in order to “punish” him or her.

In consequence of the demotion, this employee now finds himself/herself employed in a position way below what he or she is capable of and has already mastered in his/her career. Understandably, this would breed frustration and a lack of job satisfaction on personal level. This unhappiness and discontent could easily spill over to the employees he/she is now working with, as evidently, the demoted employee comes across as a “miss fit” and may tend to look down on his/her co-workers, thereby creating discomfort on collective level.

The bottom line is that unless demotion is resorted to in order to remedy some kind of employment or placement injustice and thus is viewed by both parties as a sensible solution to a current dilemma, its application is bound to be contra-productive in the medium to long run.

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