If an employee is struggling, can we demote rather than dismiss, and should we give them notice? Martin Brewer and Esther Smith advise.
The question: We want to demote rather than dismiss – but how?
We have an employee who has ended up on a final written warning follow two separate conduct issues. A further incident has arisen, which is also linked to capability. The next step for the conduct would have been to dismiss, but we wanted to give the person one final opportunity to work it out.
We and they believe that the promotion to supervisor some time ago has impacted on their ability to hit their targets. Therefore instead of dismissing, the disciplinary sanction was to demote (as allowed in our T&Cs). This will incur some loss of salary, but this should be gained back through hitting targets.
My question, do we need to give notice of the change in status and salary after the disciplinary or can it happen immediately? I can’t find anything definite in the contract but feel we should, as had we dismissed, it would have been a dismissal with notice.
Martin Brewer, partner, Mills & Reeve
Provided that your contract allows demotion as a sanction, which you say it does, you are perfectly entitled to impose that sanction and, unless the contract sets out any particular notice provision, there is no specific procedure that you have to follow.
However, a basic principle of contract law is that the employer must not act in a way which makes it impossible for the employee to perform the contract. Another way to look at this is to say that the employer must not perform the contract in a way which breaches trust and confidence. Therefore, when considering whether to impose an immediate demotion, you ought to consider the loss of pay and, if it is significant, you may want to allow the employee time to re-jig their finances in order to deal with the loss of income.
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Esther Smith, partner, Thomas Eggar
In the absence of anything specifying a notice period for implementing a demotion (which would be quite unusual) it is fine to just implement it with immediate effect, or on some short, practical notice period that suits the business. If the employee has an issue with the demotion and the time frame for implementing it, he is able to object to it but effectively in doing so would be opting for dismissal instead of demotion. Here, however, it sounds as if the employee is in agreement to the demotion so hopefully we won’t have any issues.
Just one point to mention though, is the fact that you say that had you dismissed the employee it would have been a dismissal without notice. This would only be right if you were terminating for gross misconduct, but here it appears that the dismissal would have been as a result of a further incident of misconduct on top of the final written warning already on file, which should then be a dismissal on notice.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar.