A demotion which is permitted by an industrial instrument or contract does not constitute a dismissal.
“There is a body of case law that deals with this situation. Deputy President Gooley in the matter of Terence Lollback v the University of Southern Queensland 5 considered the circumstances where a demotion is not a termination of employment. This particular matter concerned a circumstance where an employee had been demoted which the employer argued was authorised by the terms of an enterprise agreement and so was not a termination of employment and so not a dismissal.
After considering the line of authority Deputy President Gooley found that she was bound by the decision of the Full Bench of the Australian Industrial Relations Commission in Elizabeth Gorczyca v RMIT University 6 which had concluded that:
“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.” 7
Deputy President Gooley also considered another Full Bench decision of the Australian Industrial relations Commission in Charlton v Eastern Australian Airlines Pty Limited 8 which turned its attention more broadly to when the termination of employment occurs and held as follows:
“Consistent with the decision in Boo Hwa Chan, a termination of employment occurs when a contract of employment is terminated. This necessarily occurs when the employment relationship comes to an end. However, it can also occur even though the employment relationship continues. Where a contract of employment has been terminated, but the employment relationship continues, this will be because a new contract of employment has come into existence. Therefore, whether the appellant’s demotion involved his employment being “terminated by the employer” within the meaning of s.170CE turns on whether his contract of employment was terminated notwithstanding the continuing employment relationship. This question is answered by reference to general law principles relating to the termination of contracts of employment, unconstrained by the Convention.
The question of when a demotion constitutes a termination of employment within general law principles relating to termination of contracts of employment, unconstrained by the Convention, was given careful consideration by the Full Court of the Supreme Court of South Australia in Advertiser Newspapers Pty Ltd v IRC & Grivell. We respectfully adopt that analysis. Although the decision related to a different statutory context, that context required a consideration of general law principles that are equally applicable in the present case.
Unless the contract of employment or an applicable award or certified/workplace agreement authorises an employer to demote an employee, a demotion, not agreed to by the employee, that involves a significant reduction in remuneration will amount to a repudiation of the contract of employment. If that repudiation is accepted, either expressly or by conduct, then the contract of employment is terminated. If, in such circumstances, the demoted employee then remains in employment with the employer, this occurs pursuant to a new contract of employment in respect of the demoted position. It may be noted that where the employment continues with the employee allegedly acquiescing in a reduction in salary or other terms of employment, difficult questions may arise as to whether the continued employment involves the continuation of the original contract of employment (but with the employer breaching that contract by paying the reduced salary), a consensual variation of the terms of the original contract or the termination of the original contract and a substitution of a new contract of employment.” (Underlining added)
The Deputy President in that case accepted that the demotion authorised by the applicable enterprise agreement was not a termination.
This principle, that a demotion arising from the application of a clause in an agreement is not a termination of employment at the initiative of the employer nor is it a repudiation of the contract of employment, was earlier accepted and applied by Senior Deputy President Drake in the case of Michelle Holland v Qantas Airways Limited. 9
The broader statement of principle identified by the Full Bench above is that a demotion of an employee by an employer which involves a significant reduction in remuneration that is not agreed to by an employee will not amount to a repudiation of the employment contract if it is authorised by a contract of employment, an applicable award or a certified/workplace agreement.
More recently a Full Bench of the Commission in the case of Phillip Moyle v MSS Security Pty Ltd 10 simplified the applicable principle as follows:
“Whether or not the exception in s. 386 (2) (c), properly construed, was applicable, it remains necessary for Mr Moyle to demonstrate at the outset that he had been “dismissed” within the meaning of s. 386 (1).
An action taken by an employer to change the remuneration and duties of an employee could not constitute a dismissal under s. 386 (1) where the change was one authorised by the contract of employment.”
Applying these principles to the facts of this case the evidence is that Mr Singh’s contract of employment contained the following term:
“Should you no longer be required to fulfil this role due to performance or client request, the terms of this contract will cease and you will transition to the conditions of the Security Services Industry Award 2010, or other agreement as applicable to the new site/position to which you are appointed.”
After investigating the concerns raised by other employees the respondent was dissatisfied with Mr Singh’s performance as a Supervisor and no longer required him to fulfil the role of PTA’s Operations Supervisor and he was to then be returned to the role of Revenue Protection Officer. This action of the respondent, changing his remuneration and duties, was expressly authorised by his contract of employment and so did not constitute a dismissal under section 386(1) of the Act.
Consequently I find Mr Singh has not been dismissed by the respondent. Consequently Mr Singh is not able to make an application under section 394 of the Act.
I uphold the respondent’s jurisdictional objection. Mr Singh’s unfair dismissal remedy application will be dismissed for want of jurisdiction. An order to that effect will now be issued.”
Singh v MSS Security Pty Ltd (2016) FWC 1857 1857 delivered 30 March 2016 per Williams C