Many of the rights and remedies provided to employees by the Fair Work Act 2009 (Cth) (FW Act) depend on an employee having been dismissed. The recent decision of NSW Trains v James (2022) dealt with the question of whether an employee’s demotion amounts to their dismissal for FW Act purposes.

The FW Act states that an employee has been dismissed if their employment has been terminated on the employer’s initiative. Somewhat confusingly, the FW Act also states that a person has not been dismissed if they were demoted in employment, but the demotion does not involve a significant reduction in their remuneration or duties, and they remain employed with the employer that demoted them.

In James, the employee was demoted following an investigation into allegations of misconduct. The employee’s salary was reduced by almost 10%. However, he remained employed by the employer and neither his duties nor his location of work changed.

The employee lodged an unfair dismissal claim.

We looked at the case at first instance in a bulletin earlier this year. Now, the Full Bench of the Fair Work Commission (FWC) has overturned the decision.

The FWC’s capacity to deal with the claim required that it first determine that the employee had been dismissed in the relevant sense.

The Full Bench ruled the employee’s demotion did not constitute dismissal because the applicable enterprise agreement enabled the demotion.

However, the Full Bench made it clear that as a general rule, demoted employees who remain employed after their demotion could access unfair dismissal laws provisions if:

• the employer had repudiated the employee’s contract of employment by demoting the employee in circumstances involving a significant reduction in their remuneration or duties;
• the employee had accepted the employer’s repudiation of the contract (as opposed to affirming the original contract), thereby terminating the employment contract; and
• the employee had continued to be employed by the employer under a new employment contract.

If an employee continues to work in the demoted position, the employer is likely to argue that the employee has not accepted the repudiation constituted by the demotion. However, the FWC stated that, as a general proposition, this will not be the case if the employee makes clear their objection to the demotion.