Demotion can take different forms. From case law and the Labour Relations Act (LRA) we can identify three forms of demotion:
Let's take a closer look at each of these forms of demotion.
Revealed: Three types of demotion and how to use them
#1: Demotion by mutual agreement
Demotion is generally regarded as something you impose on an employee. But, it can also take place by means of a contractually binding agreement between you and your employee, says the Labour Law for Managers Loose Leaf Service.
This type of demotion may be temporary or permanent. A mutually agreed demotion seldom gives rise to a dispute.
Important: The courts and arbitrators investigate alleged mutual agreements to ensure your employee willingly entered into the agreement to be demoted and that you didn't force him.
#2: You unilaterally demote the employee for misconduct, poor performance or your operational requirements
While the first example of a genuine mutual agreement is unlikely to lead to legal disputes, the unilateral (one-sided) imposition of demotion may cause dissatisfaction and legal disputes.
In other words, the type of demotion that typically ends up in a dispute is where you decide on your own to demote your employee and he contests it.
#3: Demotion in unusual circumstances related to non-promotion
According to the Loose Leaf Service, the courts have also used less common situations and alleged that they amount to demotion, especially where a person hasn't previously been promoted or has been in an acting role, pending the appointment of someone else into the position permanently.
Although this interpretation by the CCMA and the courts seems to blur the distinction between unfair demotion and unfair promotion issues, the underlying principles are similar. And that means you need to be aware of what the courts will accept regarding demotion. Demotion must be fair.
The bottom line: While demotion can be an attractive alternative to dismissal. You must do it correctly. One wrong move could see you facing a full blow legal dispute.