Demotions can be rather commonplace in the workplace. Employers and employees alike are often concerned about what the employment law implications are of an employee’s demotion at work. Being demoted is generally seen as a bad thing to happen to an employee resulting a loss of pay, wages or prestige in the workplace. In our experience as employment lawyers, we have seen that there can be some confusion about what is a demotion and what can happen if a demotion takes place in the workplace.

This blog seeks to answer some questions about the legal implications of a demotion in the workplace. First, we investigate what is a demotion and what are examples of when a demotion has occurred. Next, we look at how constructive dismissal can result from a demotion. We also discuss how an employer may justify demoting an employee and what can happen if the demotion is an act of reprisal by the employer. Finally, we set out what steps to take if an employee thinks that they have been demoted at work.

What is a Demotion and what are Examples of Demotion in the Workplace?

A demotion means that a change has occurred where an employee’s status or prestige at work has been lowered by the employer. This change should be significant and make an impact with respect to the employee’s job. Small negative changes to the employee’s job that are insignificant will not result in a demotion.  Finally, it is also possible that a demotion could have been agreed to by both the employer and the employee, or the demotion could have come about as a unilateral decision by the employer.

Here are some common examples of a demotion:

• a reduction in the employee’s pay;
• a loss of a bonus or other pay structure like commission payments;
• a loss of equity in the company;
• a loss of perks such as a company car, laptop or cellphone;
• a loss of benefits such as insurance;
• a removal of a key account or client;
• a reduction in the employee’s responsibilities or executive decision making abilities in the workplace;
• a reduction in the employee’s work hours or workplace location;
• a removal of managerial duties;
• a change in the employee’s title; and
• a removal of direct reports or a reduction in team members.

For more information regarding demotion, please refer to our blog entitled Demoted at work? Learn what to do.

Demotion and Constructive Dismissal

Constructive dismissal occurs when an employer, without notice, makes unilateral changes to the terms and conditions of employment so that they no longer can be said to be terms of employment that the employee agreed to. These changes must be fundamental to the employment relationship or employment agreement.  Therefore, in the case of a demotion, the legal analysis would rest on 1) what the reasons were for the demotion and 2) what the significance of those changes are. Only changes that are substantial will result in constructive dismissal. Generally speaking, the greater the change is to the employment relationship that results in a lesser position, with lesser pay or a reduction in salary or the removal of responsibilities or a loss of benefits, privileges or employee perks, etc. the more likely these changes will constitute constructive dismissal.

Once the claim for constructive dismissal has been made by an employee, the employee will then generally claim against the employer for both common law and statutory damages for their termination. Further, and depending on the circumstances, the employee may also be entitled to punitive and / or general damages as well.

A possible complicating factor in a claim for constructive dismissal based on a demotion could be the employee’s employment agreement or employment contract.  This is because an employment agreement may contain terms or clauses that indicate that the employer may have the right to demote an employee in certain circumstances or with the employee’s consent. If the employment agreement does not contain any language or terms that relate to the possibility of the employer acting to demote the employee, then it will be more likely that the employee can claim that their demotion was a constructive dismissal.

Can a Demotion Be Justified by the Employer? 

It is possible that the employer may be able to justify a demotion of an employee and therefore be able to minimize their risk of a claim of constructive dismissal by an employee if it is a situation where the employee has engaged in misconduct of some kind.  For example, if an employee engages in serious or gross misconduct at work, the result may be that the employer demotes an employee rather than terminating the employee’s employment for cause. In this case it would perhaps be prudent for the employee to accept the demotion rather than claim constructive dismissal (this may be especially true if the employer had also given the employee several warnings relating to this possibility).

What if an Employer Demotes an Employee as an Act of Reprisal? 

It is illegal for an employer to demote an employee as an act of reprisal.  A reprisal in employment law in Ontario occurs when the employer intimidates, threatens, demotes and/or terminates or penalizes an employee because the employee asserted or attempted to assert their employment law rights under various statutes including Ontario’s Employment Standards Act, 2000, the Human Rights Code, 1990, etc. Employers are also prohibited from engaging in reprisals under Ontario’s Occupational Health and Safety Act, 1990, in cases where an employee raised concerns about their health and safety. An example of an illegal reprisal would be that the employee is demoted (such as their key responsibilities are removed by the employer) because the employee made a complaint about workplace harassment or discrimination. 

Steps to Take if An Employee Thinks That They Were Demoted at Work

There are some steps that an employee can take if they suspect that they have been demoted at work and have concerns about the possible demotion. Also, these steps are steps that an employee should take before they agree to any proposed demotion by the employer related to any negative change to their job description, job duties, pay structure, etc.

1. The employee should get specific information about the expected change to the employee’s job. For example, the employee should know exactly when this change is going to happen and what expectations the employer has that are related to that change.
2. The employee should ensure to document those changes to their job and request any other document(s) that may be relevant to the demotion including the employee’s employment agreement or employment contract.
3. The employee should speak to the employer so that they are aware that the employee does not consent to those changes to their job.
4. The employee should ensure that the employee does not sign or agree in writing to those changes such as agreeing to a new employment agreement.
5. The employee should then take the information or any documents from the above and approach an employment lawyer to understand their legal options and maintain their employment law entitlements to termination and severance pay.

How Can Zeilikman Law Help?

It is necessary for both employers and employees alike to contact an employment lawyer if they have any questions or concerns related to demotion or constructive dismissal in the workplace. The legal analysis about whether demotion and / or constructive dismissal is present is complex and a fact-dependent legal analysis. An employment lawyer, like the lawyers at Zeilikman Law, can help individuals with these issues by reviewing the unique facts surrounding their own case to determine what are the best legal steps to take.

For more information about this topic and other related topics, please review our blogs: 

• Can My Employer Change My Job Description Without My Consent?
• My employer has reduced my pay. What should I do?
• Workplace Relocation in Ontario: An Employee Guide

Employers and employees can contact our office at (905) 417-2227 or online here to schedule their own confidential consultation with Zeilikman Law.