In certain circumstances, a demotion at work can constitute a redundancy. A role is redundant when an employer no longer requires that particular job in the organisation, for instance, due to restructuring or downsizing. If you can demonstrate a redundancy, you may have certain legal entitlements that you can pursue.
The Fair Work Act 2009 (Cth) (Fair Work Act) sets out redundancy pay as well as any award that applies to your role. This payment is calculated by considering how long you have continuously worked for your employer. Certain categories of employers are exempt from liability for redundancy pay (e.g. small businesses). If your employer has less than 15 employees, you may not be able to access redundancy pay but should seek specific advice.
What is a Demotion?
A demotion is where your employer offers you a new role that involves a reduction in key parts of your previous position (e.g. responsibilities of seniority). Usually, your employer will terminate your previous employment agreement and offer a new contract that contains different terms. Legal issues may arise as to whether your employer's actions constitute a dismissal or a demotion.
Importantly, if you don't want to accept the new role, you are entitled to refuse the demotion and should your position clear. For practical reasons, such as the need for an ongoing salary, you may decide to enter into the new role while maintaining your objections and continue to seek a resolution of the disputed demotions.
When is a Demotion a Redundancy?
Section 386 of the Fair Work Act says that for a demotion to be considered a redundancy, it must involve a "significant reduction" in remuneration or duties. The employer must also continue to employ the demoted individual.
What is a Significant Reduction?
Courts have found in a number of cases that where an employee's responsibilities have changed in many material aspects, the employer has made their role redundant. As a result, the employee is entitled to the relevant payout. For instance, where an employer has demoted the employee from a position of senior leadership or management, or where there has been a significant change in duties and responsibilities.
When comparing your new role against your previous role, you should consider factor such as:
- number of direct reports,
- team, and
- skills and qualifications required to perform the role.
A greater number of 'significant' differences between the roles will more strongly suggest that you have been made redundant. The terms of your employment contract will also be relevant – a contract lawyer can assist you interpret your employment agreement.
In Phillip Moyle v MSS Security Pty Ltd  FWCFB 372, for instance, the Fair Work Commission found that the employer was permitted to change Moyle’s duties under the express terms of his employment agreement.
Also, if your old employment contract clearly states that your employer can demote you without terminating your employment, any demotion made consistent with this clause is unlikely to be seen as a demotion. If you employer makes you redundant without discussing this change with you first, you may have a claim for unfair dismissal.
Calculating What You Are Owed
If you think you may be entitled to a redundancy payment, you can use the calculator provided by the Fair Work Ombudsman. This calculator is a useful way of obtaining an estimate of the amount you may be able to claim from your employer under the Fair Work Act, if you are able to demonstrate that your demotion was a redundancy. The payments owed to you under the Fair Work Act can, however, be varied by an Award. Accordingly, you should confirm which Award, if any, applies to you, and review the redundancy provisions of this Award.
If your employment is terminated in circumstances where you have challenged a purported demotion, you may be able to make a claim for unfair dismissal. Crucially, any such claim must be made within 21 days. As there may be a number of options you can pursue to enforce your employment rights, we suggest speaking with one of our experienced employment lawyers. Call LegalVision on 1300 544 755.