An agreed demotion may still be unfair

The Labour Appeal Court has confirmed that even if an employee has consented after an enquiry to a demotion as an alternative to dismissal, the demotion may still be unfair.

A perception exists that when an employer and employee have agreed on the employee’s demotion, the CCMA does not have jurisdiction to hear an unfair labour practice dispute relating to the demotion.The recent judgment of Builders Warehouse (Pty) Ltd v CCMA & others (case number PA1/14) held that even an agreed demotion may potentially be unfair. An agreement on demotion therefore does not deprive the CCMA of jurisdiction.The court confirmed, however, that the employee’s consent to the demotion may well be the decisive factor in determining the fairness of the demotion. This did not preclude the CCMA from considering all the factors, such as the reason for the demotion, the degree of the demotion and whether the employee was consulted prior to the demotion. It remains to be seen whether the CCMA would be able to overturn the agreement or whether the only remedy would be compensation.

In light of this judgment, employers need to revisit the terms of agreed demotions and seek legal advice to ensure that the risk associated with agreed demotions is minimised.