According to a recent survey by the staffing firm OfficeTeam, 14 percent of American workers have experienced a demotion — asked to assume a lower-level role with or without a pay cut. Slightly more than half (52 percent) of demoted employees will choose to leave the company, and there is the risk of disgruntlement and potential lawsuits.
In today’s robust job market, however, some employers are using demotion as a way to retain otherwise sound workers who are underperforming in their current positions. Demoting an employee can be an efficient way to fill a position further down the corporate hierarchy with a trusted person who is familiar with how the company operates.
According to the OfficeTeam survey, there are a variety of situations where demotion may be appropriate:
- Poor performance
- Failure to thrive after a promotion
- Organizational restructuring resulting in the elimination of the position
- Realignment of functions under new leadership
- Responding to changing customer or business needs
- Seeking a better fit for the employee’s skill set
While it may seem that a demotion is automatically a negative, with the right approach it can give the underperforming worker a fresh start in a position they may be more suited to. Communication about the reasons for the demotion and future expectations is crucial.
A demotion doesn’t have to put a permanent black mark on the employee’s record. Some people get promoted, demoted and then promoted again, according to the Society for Human Resource Management. It’s up to your organization’s leadership to determine long-term expectations.
It’s best if the demotion takes place as part of transparent, ongoing discussions about performance and related issues. The employee should clearly understand what is prompting the decision to demote and what concrete actions they should take to move forward in the future.
There is a risk of a discrimination or retaliation claim. Depending on the situation, the employee could claim they were singled out for demotion for illegal reasons, such as discrimination or retaliation for complaining about discrimination or harassment. Retaliation claims can be brought under many federal laws and their state equivalents, if an employee believes the demotion was in retaliation for accessing those laws. Examples include Title VII of the Civil Rights Act and other equal employment opportunity laws, the Family and Medical Leave Act, the Fair Labor Standards Act, the National Labor Relations Act and the False Claims Act.
To reduce the risk of such claims, carefully and thoroughly document the reasons for the demotion in the employee’s file and communicate them as clearly as you can to the employee.
If you have questions about using demotion as a tool in your workplace, contact your employment law attorney.