The demotion of an employee may not in all circumstances meet the meaning of dismissed in section 385 of the Fair Work Act 2009 (Cth) (the Act). Consideration must be given to the continuation of employment, the whether the demotion imposed a significant reduction in status and payment.
The recent case of Phillip Moyle v MSS Security Pty Ltd  FWC 8330 sheds light on the indicative criterion when determining if a demotion results in a dismissal.
Mr. Phillip Moyle (the Applicant) was employed with MSS Pty Ltd (MSS) in 2013, and was classified as a Level 5 Security Officer under the Security Industry Award 2010 (the Award).
Following two and a half years of service the Applicant was informed by his employer that he would be transferred either Royal Adelaide Hospital or James Nash House to complete his duties. The Applicant was given seven days to decide on his preferred location.
As a consequence of the transfer, the Applicant’s shifts differed, resulting in a loss of night shift loadings, a change in his grade of employment to a Level 3 and a corresponding reduction in his base rate of pay.
As part of the “Security Officer Standing Instructions”, the Applicant had agreed to the following as part of his conditions of employment. Namely, the Applicant had agreed to perform his duties and those in the Award classifications levels below his at any site at which MSS held a contract for services (Clause 7.5.2(b)). Furthermore, the Applicant had also consented to his pay and conditions as an employee varying according to the new assignments (Clause 7.5.2(c)).
The Employee’s Contentions
Despite such relocations being ordinary and customary practice within MSS and its industry competitors, and following the Applicant’s acceptance of the alternative position at the James Nash House site, the Applicant contended that the Respondent had unfairly dismissed him.
Following accepting the James Nash House role, the Applicant raised his concerns as to pay with his employer who offered transitional compensatory payments for one month and confirmed that the Applicant had the choice to continue working on a day/night shift roster to receive late night penalties.
The financial detriment suffered by the employee was a $1.01 base hourly reduction in pay and fewer night shifts that attracted additional penalties under the Award.
As part of his submissions, the Applicant contended that he had only continued to undertake diminished duties under protest, and that “he had done nothing wrong”.
Consideration of Case Law and Statute
Senior Deputy President O’Callaghan’s (SDP Callaghan) focus at the outset was the jurisdictional issue of whether the Applicant had actually been dismissed by the Respondent. MSS submitted that the reduction in remuneration and changing classifications could not be regarded as significant enough to attract the jurisdiction to make an unfair dismissal complaint.
SDP Callaghan took the plain meaning approach to the interpretation of section 386(2)(c), namely that a demotion in employment can only constitute a dismissal for the purposes of Division 3 of Part 3-2 of the 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.
SDP Callaghan relied on Barkla v G4S Custodial Services Pty Ltd  FWAFB 3769 as authority for this point. Commentary of the Full Bench in Charlton v Eastern Australian Airlines (2006) 154 IR 239 was also relied on:
“…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…
Unless the contract of employment or an applicable award or certified agreement authorises and employer to demote an employee, a demotion, not agreed 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…”
In reliance on these cases and a ‘plain meaning’ reading of section 386(2)(c) of the Act, the allocation of Level 3 duties could not be properly described as a significant reduction in his duties, nor did the demotion severe the employment relationship.
The transfer to a new location and adjustment in duties and remuneration were consistent with the employment contract, and there was no identified repudiation of the employment contract.
Rather, SDP Callaghan considered the Applicant had standing to pursue a dispute resolution process through the Award dispute resolution provisions (Clause 9).
This decision has been confirmed by the Full Bench of the Fair Work Commission, but qualified that the Respondent does not bear the responsibility to negative both limbs of exception under section 286(2)(c) of the Act.
This decision identifies the important considerations for employers when demoting an employee, including continuity of employment and relative reduction in status and pay. Despite acceptance of the alternative role, these factors should be considered alongside the contract of employment and in light of any potential risks of unfair dismissal.
The content of this articles is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances by contacting the National Retail Associations Legal Team on 1800 RETAIL (738 245)