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Three Things to Know Before Demoting an Employee

 

Employee demotions occur for various reasons, including:

  • Poor job performance.
  • The position being eliminated.
  • Disciplinary action (for conduct issues).
  • The organization being restructured.
  • Seeking a better fit for the employee's skill set.
  • Changing business needs.
  • Voluntary decision by the employee.

According to a study by OfficeTeam, poor performance is the No. 1 reason for demotions. In second place is a recent promotion not working out.

Although demotion may seem like the best course of action, industry experts caution that, if improperly done, the employer could face legal challenges. Consequently, demotions should be approached carefully and legally.

Before you demote an employee, keep the following three tips top of mind:

1. Identify the legal risks.

Demotions gone wrong could lead to employees filing discrimination or retaliation claims against their employers. Depending on the case, employees might claim that they're being demoted for discriminatory reasons, such as race, gender, disability, age, religion or sexual orientation. Or they might claim they're being retaliated against for exercising their employment rights.

Second, there's the matter of pay cuts, which tend to accompany demotions. To avoid legal fallout, the employer must ensure that pay reductions are lawfully executed.

Third, employers need to be mindful of using demotions as a strategy for eventually terminating an employee. According to an article published by Workforce.com, employers should not use demotions as a way of getting employees to quit, as this could result in employees filing a claim alleging that they were pressured into quitting.

2. Document the reasons for the demotion.

It's essential that you accurately and thoroughly document the reasons for the demotion, including the circumstances leading up to it — as this goes a long way in protecting you during potential litigation. This is especially important when dealing with demotions that stem from performance or conduct issues. In these situations, you'll need to draw on key documents, such as the job description, performance reviews, action or improvement plans, company policies, and disciplinary actions taken thus far.

3. Get legal advice.

Even if your company has an established policy for handling demotions, you may still want to consult with an employment law attorney before demoting an employee. You'll probably have many questions that require expert input, such as:

  • Is a demotion likely to correct the issue?
  • Would termination be more practical?
  • What message will the demotion send to other employees?
  • How will the demotion likely affect the employee in question?
  • What legal blowbacks are possible in this situation?
  • If demotion is the best solution, when and how should I communicate it to the employee?
  • Who else besides the employee should I tell about the demotion?

An employment law attorney can guide you in the right direction.

 

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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