Demoting an Employee Has Risks

financial-crisis-544944_1280Demotion is a rarely used personnel practice. So why include a demotion policy in your employee handbook, if you don’t expect to demote anyone anytime soon?

Because sooner or later you will have to change an employee’s duties in a way the employee sees as a demotion.  You may call it a transfer, or a reassignment.  But the employee will know it as a dreaded demotion.  And a demotion (no matter what you might call it) is hurtful and embarrassing. By putting a demotion and change-in-duties policy in your employee handbook, your employees will know the circumstances under which they might experience a demotion or reassignment.

If you think of demotion always as a negative form of discipline, take another look.

Example: Courtney was a hard-working, loyal employee for 10 years. So her supervisor recommended she be promoted as manager of another department. After six months, Courtney was miserable in her new job.  She had trouble managing the employees who worked under her and avoided disciplining them at all costs.  Courtney’s boss valued her as an employee and wanted to keep her on, but he also realized he may have promoted her beyond her capabilities. So he decided to reassign her to her original duties.  To his surprise, Courtney welcomed her old job back.

In old-time management days demotion was used as a form of disciplining employees, to teach them a lesson.  In today’s management, demotion can be used effectively, in a less-threatening way.

Demotion can be used in the following ways:

  • When you’ve promoted employees beyond their capabilities.
  • As an alternative to a layoff. For example, you want to hang on to your managers but due to downsizing their management positions have been eliminated.
  • Employees need to further develop their skills.
  • As a disciplinary step.

Here’s another example: You hired Mark as a lineman.  After only three months on the job, you promoted him to foreman.  But Mark did not fully understand his job duties as lineman, let alone his duties as a foreman.  So he was reassigned to his old job to further develop those skills and, in time, get promoted again.

Risks of Demotion

Demoting an employee has three major risks:

  1. The first, and most obvious is, a demoted employee often is an angry employee who turns on the employer, disrupts the workplace, sabotages production, even turns violent.  You can lessen the chances of anger and violence by preparing an employee for a demotion.  You do this by coaching him or her in the type of performance you expect, giving the employee opportunities to improve performance, and letting the employee know that demotion is possible if the performance doesn’t improve.
  2. The second risk is illegally discriminating against protected employees by targeting them with demotion.  One of the advantages of spelling out demotion guidelines in your handbook is… it helps you and your managers and supervisors apply the same standards to all employees and avoid targeting employees in legally protected classes.
  3. The third risk is using demotion to force an employee to quit.  This is a constructive discharge, and it can give an employee grounds to charge you with wrongful discharge and (at the very least) to qualify for unemployment benefits.

A demotion can create conditions which give an employee the right to unemployment benefits.  In addition to arguing the demotion was, in fact, a forced termination (or constructive discharge), the employee can argue the demotion creates major changes in the conditions of employment which justify the employee’s claim to unemployment benefits.


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