Demoted at work? This can be an unfair dismissal
Being demoted can be distressing, especially if it comes with a significant reduction in your salary, status, or job responsibilities. But did you know that in some cases, a demotion can be considered a dismissal?
Under Australian workplace law, if your employer significantly reduces your pay or duties without your agreement, you may be able to make an unfair dismissal claim, even if you are still technically employed.
When Is a Demotion Considered a Dismissal?
A demotion may be legally classified as a dismissal under the Fair Work Act 2009 if:
You experience a significant reduction in your duties or responsibilities.
You receive a substantial pay cut.
Your employment contract does not allow for demotion without termination.
Your employer forces the demotion without your consent.
If your employer unilaterally changes your job in a way that makes it less senior, reduces your pay, or removes key responsibilities, they may have repudiated your contract (breached the fundamental terms of your employment). If you accept this repudiation, then legally, your original employment contract is terminated—which can open the door for an unfair dismissal claim.
What If You Continue Working After a Demotion?
If you remain in the job after being demoted, two possible legal interpretations apply:
You accept the new terms – If you continue working without objection, it may be seen as acceptance of a new employment contract, making it harder to argue that you were unfairly dismissed.
You work under protest – If you clearly state that you do not accept the demotion and are only staying for financial or other reasons, you may still be able to argue that you were effectively dismissed.
When a Demotion Is NOT a Dismissal
If your employment contract or an industrial award specifically allows for demotion, then your employer may have the right to reduce your position without it being classified as a dismissal. In such cases, challenging the demotion may require a different legal approach, such as claiming breach of contract or unlawful adverse action.
Real-Life Cases: When Demotion Equals Dismissal
Case 1: Demotion with a Large Pay Cut = Unfair Dismissal
Johnson v Zehut Pty Limited T/A URBRANDS
A long-term employee had worked in senior positions, including National Sales Manager and National Operations Manager. She was asked to take on a struggling store but was promised that her salary would remain the same.
A year later, the company tried to force a pay cut of over $30,000 per year. When she refused, they treated it as her resignation. The Fair Work Commission ruled that she had not resigned, but was dismissed at the employer’s initiative. The dismissal was deemed harsh, unjust, and unreasonable.
Key takeaway: If your employer forces a major pay cut and treats your refusal as a resignation, you may have an unfair dismissal claim.
Case 2: Pay Cut & Loss of Responsibilities = Unfair Dismissal
FLSmidth Pty Limited
An employee was demoted from Service Supervisor to Mechanical Service Technician, which meant:
A 9.3% reduction in base hourly pay.
A decrease in overtime rates and superannuation contributions.
Loss of all supervisory duties (previously supervised 8 employees).
No more client interactions.
Moving from office/site-based work to manual labour.
The employer argued that because the employee was still technically employed, he had not been dismissed. The Fair Work Commission found that the demotion was legally a dismissal due to the significant reduction in both pay and responsibilities. The employer’s attempt to block the unfair dismissal claim was rejected.
Key takeaway: Even a moderate pay cut (9.3%) and loss of responsibilities can amount to a dismissal.
What You Need to Prove in an Unfair Dismissal Claim
Your demotion resulted in a significant reduction in pay or job responsibilities.
You did not consent to the demotion.
Your employment contract did not allow for demotion without termination.
Your employer’s actions led to a repudiation of your contract.
