Published — March 15, 2018
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Related Topic: How to Dismiss an Erring Employee the Right Way
Legally, the owner of a business enterprise is given considerable leeway in managing his business, based on the principle of managerial control of business, flowing from ownership of property and the rationale of business enterprise. These rights, collectively called management prerogatives, comprise the owner’s freedom to administer the affairs of his business, which may even include the right to demote an employee [See: G.R. No. 125303].
While ordinarily not interfered with, the exercise of management prerogative is not absolute and is subject to limitations imposed by law, collective bargaining agreement, and general principles of fair play and justice [G.R. No. 174208].
Due process to be observed before demotion
While due process required by law is applied on dismissals, the same is also applicable to demotions as the latter likewise affect the employment of a worker whose right to continued employment, under the same terms and conditions, is also protected by law. Moreover, considering that demotion is, like dismissal, also a punitive action, the employee being demoted should, as in cases of dismissals, be notified in advance of his impending demotion and subsequently given a chance to contest the same [See: G.R. No. 118045].
Based on this, even the employer’s right to demote an employee requires the observation of the twin notice requirement [G.R. No. 155264]. Also, similar to dismissals, demotions must be supported by just cause. Otherwise, the demotion will be considered to have been made illegally.
Transfer vs. demotion
A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in service, while demotion involves a situation where an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary [See: G.R. No. 171764].
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or area of operation to another provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause [G.R. No. 163091].
When demotion may constitute constructive dismissal
Demotion, when done illegally, may unduly expose the employer to complaints for constructive dismissal when the employee later on decides to resign after being demoted.
When there is demotion in rank and/or a diminution in pay; when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee; or when continued employment is rendered impossible, unreasonable or unlikely, then it may constitute constructive dismissal [See: G.R. No. 173882].
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under the circumstances. It is an act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of employees in order to protect their rights and interests from the coercive acts of the employer [G.R. No. 191053].
Where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for the employer. Hence, the employee’s severance from the company was considered as not of his own making and therefore amounted to an illegal termination of employment [See: G.R. No. 150092].
Poor performance as cause for demotion
Be that as it may, demotions may also be resorted if, based on the performance evaluation of the concerned employee, he failed to live up to the work standards of the employer. The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them [See: G.R. No. 155421]. In line with this, when an employee’s performance is evaluated, and is found to be unfit to remain in his position, then he may be demoted to a lower position on the basis thereof.
Demotions due to poor performance could be taken as the solution, especially if it was shown that the employee’s poor performance is due to unfitness to perform the functions of a higher position, while he has thrived and performed well in his former position. This notwithstanding, the employee’s performance evaluation should still reflect this fact to avoid any complications.
Given the foregoing, whether the demotion is brought about by issues on performance or conduct, the employer cannot demote an employee simply based only on whim. Despite being part of an employer’s prerogative, the right of the employee to be secured in his position still has to be respected, and thus, the legal aspects surrounding demotion of employees must be observed. Certainly, any illegal demotion could prove to be costly for the enterprise, which the employer can avoid.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding employment disciplinary procedures, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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I do trust all the ideas you have offered for your
post. They’re really convincing and will certainly work.
Still, the posts are very short for starters. Could you please extend them a little from next time?
Thank you for the post.
I couldn’t resist commenting. Very well written!
Thank you for this imformation sir.
But i would like to inquire about the situation of my husband in his current work.
He performs well as a hemodialysis nurse suprrvisor in a hospital here in our town cagayan de oro city(mindanao). He had loved and dedicated his life in his career for 9 years. He have had handled the unit for more than three years up to present. Early this year the employer decided to close the hemo unit and leave it for rent to interested hemodialysis center.
My husband was asking their chief nurse as to what will happen to him after his unit will be dissolved. There were no clear assurance that he could keep his position as a nurse supervisor. His fear is that if he wil be return to staff nurse again his salary will also be demoted.
I would like to ask your opinion regarding on these matter. We were in dull situation and stressed out while waiting for the outcome . He only want to hear an assurance from his employer but there were no guarantee if they still wanted him to stay in their institution or not. As I’ve read your statement above, it was most likely a contructive dismissal. I think the employer wanted my husband to resign but just waiting for him to act on his resignation instead. He was considering that maybe its time to look for another job; but I know his heart belongs to this unit because of his hemo patients that were close to him. There were so many opportunities that he slipped away to go abroad and earn more but he chose to stay in this institution.
His superiors never assure him that he can keep his position that is our worry. What will happen to us, he is our only bread winner. I have a little business like food take out here in our home displayed outside but im afraid it wont last till he can find another job.
He was even willing to return as a staff nurse again. If that will happen, will his salary also return to as a staff nurse rate?
Supervisor rate 650
Cagayan de oro city salary rate minimum wage is currently at 450