Demotion as an alternative to retrenchment
16 July 2021 00:00 by Kayla Pashiou
South African companies and organisations considering using demotion as an alternative to retrenchment need to bear in mind several labour law considerations with regard to its context and correct implementation.
Written by Kayla Pashiou, Senior Associate at Christodoulou & Mavrikis Inc, for LexisNexis South Africa
Demotion as an alternative to retrenchment: One way to assist employers with the Covid-19 outbreak
A number of international and local companies have requested that their employees work from home due to the dire consequences of the COVID-19 coronavirus pandemic. With some employees also opting to self-quarantine, there are a number of labour law considerations that South African companies and organisations have to consider the following:
- If an employee is not sick and still willing to attend work, but it is a direct instruction from their employer to remain at home, such employees will still be entitled to earn and receive their normal salary and benefits.
According to the Consolidated COVID-19 Directive on Health and Safety in the workplace published on 1 October 2020 (the Consolidated Directive), an employee must be placed on sick leave in terms of section 22 of the Basic Conditions of Employment Act (BCEA) if –
- The employee presents himself/herself with symptoms of COVID-19; or
- The employee advises the employer of such symptoms.
The employer is entitled to request proof of illness in order to grant such paid sick leave. If sick leave is exhausted, the employee may claim UIF illness benefits.
- If, however, the employee has travelled to an “at risk” area or has been in direct contact with people who have the COVID-19 disease, the employer may consider flexi/remote working, special leave or sick leave if the employee is sick.
If the employee has had a high-risk exposure to a person who is Covid-19 positive, the employee should self-isolate, and the employer is entitled to request proof before treating it as paid leave (for example proof that the person who the employee alleges having been in contact with has in fact been tested positive). If the case is a low-risk contact, the employee will not be entitled to paid leave, unless the employer requests the employee to stay home.
In matters where an employee has been in close contact with a person who has tested positive for COVID-19, but does not present symptoms, sick leave will not be applicable. In these cases, and in order to minimize the risk and avoid further transmission, the employee should be required to work from home. If for example, the employee’s duties cannot be performed remotely at home, the employer should consider granting special leave which is paid leave over and above the employee’s ordinary leave entitlements which is in compliance with the notice published by the Compensation Commissioner in terms of the Compensation for Occupational Injuries and Diseases Act 130 of 1993, in respect of ‘Occupationally acquired COVID-19’, which records that for suspected and unconfirmed cases of COVID-19 and for self-quarantine recommended by a registered medical practitioner, the employer will be liable for remuneration for the days of absence.
- If an employee refuses to attend work because of concerns of contracting the virus (given the declaration of a disaster by President Cyril Ramaphosa), each case should be dealt with based on its own merits. For instance if the employee has a particular health issue that would make them particularly vulnerable to the disease, this must be taken into consideration, or. if there is a reasonable concern that an employee may contract the virus while attending work, the employer must attend to an immediate investigation on an urgent basis.
- However, if the employer attends to a full and proper investigation and there is still no real or justifiable reason for concern or fear about contracting the virus (e.g. where it is found that false information has been circulating), employees who fail to obey a reasonable instruction to attend work can be disciplined.
Demotion may be one of the ways to assist employers with financial issues due to COVID-19:
Demotion can occur in the following ways:
The employer gives the employee a letter stating that he/she has been demoted due to:
- The employee’s pay and/or responsibilities having been reduced.
- The employee’s subordinates – have been taken away.
- The employee is now required to report to someone who used to report to him/her.
- An employee acting temporarily in one position – has been transferred back to his/her old position.
Despite trying circumstances, employers are advised to take all labour law considerations into account before imposing a demotion on an employee. The reason for this is that should the CCMA or bargaining council find the demotion to be unfair the commissioner has the right to:
- Reinstate the employee into the position from which he/she was demoted.
- Award the employee compensation.
- Apply any other corrective measure that he/she deems to be appropriate.
In Plaatjies vs RK Agencies (2005, 1 BALR 77) the employer offered the employee an alternative position at a lower salary due to the fact that the employer had lost a major contract. While the arbitrator accepted this as a valid reason, the demotion was still unfair because the employer had failed to consult with the employee before making the offer.
In view of the above decision employers should never implement demotion before obtaining the appropriate labour law advice as to:
- Whether the demotion is merited (in COVID-19’s case it would be, as the employer will no longer be able to afford salaries).
- The procedure to be followed in implementing a fair demotion.
In terms of Ngxowa v Sebenza Manufacturing System  11 BALR 1122 (MEIBC], a demotion occurs when the Employer diminishes the status of the work or responsibilities of an Employee even when their remuneration remains the same. Section 186(2)(a) of the Labour Relations Act 66 of 1995 provides that any act or omission involving the unfair conduct of the employer in relation to demotion constitutes an unfair labour practice.
There are three contexts in which demotion arises and they are:
- as a disciplinary measure;
- as an alternative to dismissal for incapacity; and
- as an alternative to retrenchment.
In Piki and Development Action Group Inc (2002) 23 ILJ 609 (CCMA)the CCMA held that an employer is not permitted to unilaterally change the employment conditions of the contract of employment without the employee’s consent. Since a demotion without consent is a repudiation of the employment contract, it, therefore, entitles the employee to sue for breach of contract.
An employer should always consider a demotion as an alternative to retrenchment. The main reason for this is that a person would rather have a job with less money than no job at all. Should an employee refuse the demotion, the employee will be entitled to severance pay, as long as the reason for refusal is justifiable. Should such refusal of demotion as opposed to retrenchment be unreasonable, the employee will not be entitled to severance pay in terms of Sub-Sections 41(2) and 41(4) of the Basic Conditions of Employment Act 75 of 1997.
Employers must always obtain the employee’s consent to a demotion, in writing, as it entails the changing of an employee’s terms and conditions of employment. This means a demotion cannot be effected unilaterally by an employer without consulting with the employee. Should an employer demote an employee without affording the employee the right to be heard, it could amount to an unfair labour practice with the employer being liable to the employee for either reinstatement or compensation.
In the case of a dismissal for operational requirements, an employer may suggest that the employee consider accepting a more inferior position to the one previously held, with a reduction of salary as an alternative to retrenchment. This may assist with small, medium and large businesses having to accommodate the financial distress that the COVID-19 has and will still bring to the economy of South Africa.
Remember, consultation aimed at seeking alternatives to retrenchment is imperative!
Senior Associate at Christodoulou & Mavrikis Inc
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