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A demotion doesn’t necessarily mean an employee has been dismissed.
But what happens when the change is significant enough that the employee’s employment contract is effectively changed underneath them?
A recent Fair Work Commission decision is a good reminder that employers need to think carefully before demoting an employee, particularly where the change involves a significant drop in responsibility, status or pay.
A recent case
In Taylor v Department of Justice and Community Safety [2026], an employee was demoted from Prison Supervisor to Senior Prison Officer and transferred to another prison following a misconduct process.
The employer’s enterprise agreement allowed demotion as a possible disciplinary outcome. However, the Full Bench found that the particular way the demotion and transfer were implemented was not authorised by the agreement.
The Commission went on to find that the demotion itself amounted to a repudiation of the employee’s employment contract.
Why?
The employee’s position as a Prison Supervisor was a fundamental part of his employment. Moving him into a lower-level role was a significant change to his status and level of responsibility.
The employee later accepted that repudiation by lodging an unfair dismissal application.
The result? The Commission found that his employment had been dismissed, even though he had continued working for the employer.
What can employers take from this?
The key message isn’t that employers can’t demote employees.
It’s that you need to make sure you have the right to do it, and that the process and outcome are appropriate.
Before making a demotion decision, employers should check:
- The employment contract –Does it allow the employer to make the proposed change?
- The award or enterprise agreement – Are there provisions dealing with demotion, disciplinary outcomes or changes to employment? If you’re relying on one of these provisions, make sure you’re following it correctly.
- The extent of the change – Is the employee simply taking on different duties, or are they moving into a substantially lower-level role with less responsibility or pay?
- The process – If the demotion relates to misconduct or performance, has the employee been given a fair opportunity to respond before a decision is made?
Don’t treat demotion as a quick fix
Sometimes a demotion may seem like the simplest way to deal with an employee who isn’t meeting expectations or has breached workplace standards.
But changing someone’s position, responsibilities or pay without first checking whether you’re entitled to make that change can create a much bigger HR problem.
And as this case shows, an employee can remain at work and still potentially have been dismissed for the purposes of the Fair Work Act.
If you’re considering demoting an employee, it’s worth checking the employment contract, applicable award or enterprise agreement and the proposed changes before making the decision.
Not sure where you stand?
Edwards HR can help you work through tricky employee issues, from performance and conduct matters to disciplinary processes and changes to employment.
