When will a demotion be a dismissal?

When will a demotion be a dismissal? The plain words of s.386(2)(c) must be construed such that a demotion in employment can only constitute dismissal for the purposes of Division 3 of Part 3-2 of the FW Act if the employee does not remain employed by that employer and the demotion involves either a significant reduction in the employee’s remuneration or duties. This section of the FW Act does not provide that a reduction in either duties or remuneration is sufficient, of itself, to constitute a dismissal. A mandatory requirement is that the employee no longer remains employed. That approach is consistent with the approach in the Full Bench decision in Barkla v G4S Custodial Services Pty Ltd.8
The Full Bench decision in Charlton v Eastern Australian Airlines Pty Ltd9 provides some further insight. I note that this decision was reached under a legislative regime which at that time specifically incorporated a reference to the Termination of Employment Convention. In that matter the Full Bench addressed the history of what is now s.386(2)(c). The Full Bench stated:
“[32] 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.
[33] 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.
[34] 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.”
Moyle v MSS Security Pty Ltd (2015) FWC 8330 delivered 8 December 2015 per O’Callaghan SDP