Demotion may, or may not, be a dismissal

The demotion of an employee may, or may not, be regarded as a dismissal by Australian law. Here the principles are explained in a Fair Work Commission unfair dismissal case.

“In Blair v Chubb Security Australia Pty Ltd (Blair) 8 Commissioner Whelan stated the following in relation to a demotion, repudiation of a contract and a termination at the initiative of the employer:

“A demotion may amount to a repudiation of the contract by the employer. It may then constitute a termination of employment at the initiative of the employer. In not all circumstances will a demotion constitute a repudiation of the contract or bring about a termination of employment at the initiative of the employer. The contract may, for example, allow the employer to demote an employee in certain circumstances.

Even where a demotion would amount to a repudiation of the contract, at common law, it may not be a “termination at the initiative of the employer” for the purposes of the Workplace Relations Act 1996. Where the contract is silent, but an award or other industrial instrument provided for under the Act allows the employer to demote an employee, there will be no termination of employment for the purposes of section 170CE(1).” (emphasis added)

Furthermore, in Elizabeth Gorczyca v RMIT University 9 the Full Bench stated:

“[18] As we understand the submission of Mr Irving however, he argues that notwithstanding this position the Act itself creates an inalienable right to contest a termination if the criteria in s.170CD of the Act is attracted. His submission it is in effect that the entitlement cannot be excluded either by operation of contract, award or certified agreement. Put simply the Act gives a right to contest the termination in the circumstances defined.

[19] The difficulty with this approach is, however, that we do not believe that there has been a termination. Mr Bourke rightly argued that the question of whether there had been a termination is a question of jurisdictional fact. Where there is a contract of employment in existence and the contract is brought to an end, it is easy to establish that there is a termination. However, in a case such as this termination must be implied from all of the circumstances, for in reality, the appellant continues to work for the respondent. On her behalf it was argued in effect that the provisions of s.170CD(1B) of the Act mean there has been a termination because of her demotion with the resultant loss of income. The respondent argues there has not been a termination because the certified agreement permits the demotion without regard to the income loss and provides in effect that it is not a termination. We think that the latter proposition is correct. There has not been a termination because the certified agreement operates to preclude there being one in the circumstances of this case. Put another way we think, at law there has been no termination and if there has been no termination we do not see, notwithstanding the provisions of s.170CD(1B) that there has been a termination for purposes of the Act.

[20] Our conclusion in this regard is fortified by the decision in Quickenden v Commissioner O’Connor.” (citations omitted) (emphasis added)

Whilst the decisions of Blair and Gorczyca relate to s.170CE(1) of the Workplace Relations Act 1996 (Cth), the predecessor to the Fair Work Act 2009, the principles are relevant when considering s.386(1)(a) of the Act. For completeness, section 170CE(1), provided as follows:

“170CE  Application to Commission to deal with termination under this Subdivision

(1)  Subject to subsection (5), an employee whose employment has been terminated by the employer may apply to the Commission for relief in respect of the termination of that employment:

(a)  on the ground that the termination was harsh, unjust or unreasonable; or

(b)  on the ground of an alleged contravention of section 170CK, 170CL, 170CM or 170CN; or

(c)  on any combination of grounds in paragraph (b) or on a ground or grounds in paragraph (b) and the ground in paragraph (a).”

Clause 18 of the Agreement, which covers Ms Nesbitt and the Rail Commissioner, provides as follows:

“18 DEMOTION DUE TO MISCONDUCT OR UNSATISFACTORY PERFORMANCE

18.1 Where there is serious consideration an employee is to be terminated based on a finding of:

  • serious misconduct;
  • continual misconduct; and/or
  • continual unsatisfactory performance,

the Rail Commissioner can unilaterally elect to demote that employee instead of terminating their employment.

18.2 The decision to demote an employee can be made for a set period of time or indefinitely.

18.3 Demotion includes, but is not limited to;

  • Demotion to a classification with lower remuneration within the Rail Commissioner; and/or
  • Demotion to a classification with the same remuneration but with lower status in the Rail Commissioner organisational structure.

18.4 An employee cannot be demoted to a transitional classification (i.e. Intermediate Tram Operator or Trainee Senior Tram Operator).

18.5 The act of demoting an employee does not constitute a breach of the employee’s contract of employment or termination of the employee’s employment, or affect the continuity of the employee’s employment for any purpose.

18.6 Notwithstanding clause 18.5, this clause does not preclude an employee from being able to undertake an unfair dismissal application under the Fair Work Act 2009 (Cth) or a dispute under this Agreement.”

There is no dispute that the demotion was in accordance with clause 18 of the Agreement.

The ARTBIU contended that clause 18.6 of the Agreement provided Ms Nesbitt with the ability to pursue an unfair dismissal application. A plain reading of clause 18.6 reveals that there is no barrier to the lodgement of a s.394 application or processing a dispute (potentially pursuant to s.739 of the Act).

There is some dispute over the intent of the parties with respect to the operation of clause 18.6. Regardless of the parties intention, an agreement is unable to confer powers under Part 3-2 of Division 1 of the Act on the Commission that it does not have. If an applicant has not been dismissed within the meaning of s.386 of the Act, clause 18.6 of the Agreement cannot confer powers on the Commission to determine an unfair dismissal claim.

The capacity for private arbitration rights to be conferred on the Commission via a dispute resolution process is a different matter. Clause 18.6 provides a right for Ms Nesbitt to process her complaint as a dispute under the Agreement. This approach appears to remain available to Ms Nesbitt.

I find that the demotion was in accordance with the applicable Agreement and that, having applied the authorities discussed, Ms Nesbitt has not been dismissed in accordance with the meaning contained in s.386(1)(a) of the Act. Given that there was no dismissal under s.386(1)(a), consideration has not been given to whether s.386(2)(c) of the Act applied. 10

Accordingly, this application must be dismissed.”

Nesbitt v Rail Commissioner (2020) FWC 3710 delivered 20 July 2020 per Platt C