Legal Requirements for Demotion of Employee

Demotion is said to exist when there is a reduction in:

  •  salary
  •  rank
  •  position

Generally, demotion is allowed as a valid exercise of management prerogative, often as a consequence of an employee’s failure to comply with company productivity standards.  (Leonardo vs. NLRC, June 16, 2000 and Fuerte vs. Aquino, June 16, 2000)

Due Process Requirement.

While an employer may demote an employee for valid reasons, it must first comply with the twin requirements of notice and hearing.  This is because a demotion affects the employment of an employee, whose right to continued employment under the same terms and conditions, is likewise protected by law.  (Floren Hotel vs. NLRC, May 6, 2005)  Demotion, like dismissal or termination from employment, is in the nature of a punitive action, which an employee should be given a chance to contest.

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35 thoughts on “Legal Requirements for Demotion of Employee

  1. Fina

    Dear Atty. Florido,

    How can we legally terminate an employee, who worked for us for 15 years but whom we have discovered to have covered-up and sided the grave misconduct, theft, and the use of marijuana of his younger brother who also works for us? Reports have also reached us that he extorts commissions from our suppliers…Would affidavits from these Suppliers suffice? What is an alternative if they are not willing to testify? He also displays an arrogant, disrespectful, know-it-all character that we have been so unhappy about. He acts like he is more superior than us, his employers, and sometimes even questions our instructions and decisions. At this point, we cannot stand his insubordinate ways and really find it hard to trust him anymore and have withdrawn some of the sensitive and confidential responsibilities we used to entrust to him. Although,there have not been any formal written or verbal instruction given to him, he continues to enjoy the same way above the minimum wage salary and other many benefits.Is this a right/legal thing to do? Our operations have been affected and hampered, is it legal for us to demote him to a lower responsibility and relocate him to another place of work?…For your info, our business is a Layer Poultry Farm and we are presently in the process of transferring to another place to comply with the environmental clearance requirement.

    Your legal advice will be much appreciated. Thank you very much.

    Respectfully yours,

    Fina

    Reply
    1. CFlorido Post author

      Fina:
      You will have to do the following:
      1st Notice. Send him a written notice stating the details of his offense and require him to submit a written explanation withint seventy two (72) hours from receipt of notice.
      Conduct a hearing. After receiving his written explanation, set a date to meet with him, his lawyer (if any) and a responsible officer of your company in charge of firing. The hearing is an informal one you can hold in your office premises. This is his opportunity to answer or defend himself and the company’s chance to ask additional questions to get a clearer picture of the incidents.
      2nd notice. If after carefully studying the evidence, statements and answer of the employee, you find enough ground/s to dismiss him, then inform him of that decision and state your reasons for finding it as such.

      What will constitute enough grounds is dependent on the circumstances of each case. Considering the employee’s attitude as you described, I strongly suggest that you obtain legal counsel to assist you in the whole termination process so as not to make any technical mistakes.

      I hope this helps.
      —————–
      This blog’s legal disclaimer policy applies.

      Reply
  2. Katt

    Demotions recently happened in a hospital in Angeles City. Rumor says, without due process. What actions can the affected nurses do about this?

    Reply
    1. CFlorido Post author

      Katt:
      If they believe that due process was not observed in their demotion, then their first step is to approach a lawyer and present all their documents (if any) for a clear assessment of the matter. Depending on the actual circumstances of the case, the lawyer may recommend filing of a complaint with the labor arbiter for constructive dismissal. I hope this helps.

      Reply
  3. Carlos V.

    I was recently demoted from a District Manager to a store supervisor and at the time didnt think it was done the right way. I was put on a conference call with my Regional Manager and Director with my replacement sitting next to me, then was told the news. I have produced more sales Month over Month and produced more than the DM before me. I struggled a bit in the beggining with the operations side of things but after being trained, i was receiving good feedback on the way i was running my market. As a manager i am pretty sure its ok to demote someone and ask them to do the same job for less money and a smaller title but is it legal to not even let them know that they have an option to leave the company if they wish? I wanted to leave with out notice that day but i dont want to burn that bridge when i find another job…i am looking! Please let me know what you think

    Thanks

    Reply
    1. Christine Florido Post author

      Hello, Carlos.
      You are correct in saying that demotion as a consequence of poor performance is part of management’s prerogative for as long as the company observes legal procedure in implementing its decision.

      Since demotion is in the nature of a dismissal, the employer must follow the due process requirements of giving 2 notices to the employee concerned. The first notice will typically contain the incident or acts complained of and the possible sanction of dismissal or demotion. It should also give the employee ample time to explain his side in writing and set a date and time to air his side as well. After giving the employee an opportunity to be heard, the employer should issue a second notice informing the employee of its decision and citing its reasons.

      You said “As a manager i am pretty sure its ok to demote someone and ask them to do the same job for less money and a smaller title but is it legal to not even let them know that they have an option to leave the company if they wish? I wanted to leave with out notice that day but i dont want to burn that bridge when i find another job

      The employee’s right to resign is always there, whether or not the option is given by the employer. That decision rests entirely with you and I cannot say whether it is going to be advantageous should you decide to question your demotion in labor court.

      I suggest that you think things over. Given the procedural requirements I just mentioned, you should be able to gauge whether your employer complied with labor standards in your demotion. If you feel that your demotion lacks just cause, then you need to decide whether to take the next step of questioning the decision in labor court. Bear in mind that loss of confidence arising from continuous poor performance can also be a cause for demotion of a managerial employee. But even assuming for the sake of argument that there is just cause for a demotion, an employer’s failure to comply with prescribed legal procedure for demotion may still be raised before the labor arbiter.

      Reply
  4. Jasmin S.

    atty, what if an accountant was ordered by the higher bosses to lend the company’s money to a hotel (w/c in turn was paid). it was instructed by the bosses,. and now he was demoted. is it just?what shall he do? the internal auditors were the ones who conducted the audit . please help! thanks

    Reply
    1. Atty. CFlorido Post author

      Hello, Jasmin:

      The rules on demotion are similar to termination of employees. The employer must comply with both substantive and procedural due process.

      Procedural due process means giving the employee at least 2 notices– First, informing him of the offense or charge, which in this case is the transfer of funds allegedly beyond his authority to do so, and giving him the opportunity to explain his side (also known as the opportunity to be heard) in writing and in a clarification conference or administrative hearing with company officers.

      Second notice. After giving the employee the required first notice and opportunity to be heard, the employer who decides that demotion is the appropriate sanction will have to issue a second notice informing the employee of its decision to demote as well as the justification or basis for it.

      Regarding the “just” cause of the demotion, that determination is left to the employer who is in the position to appreciate all the circumstances of the case. If the employee feels that there was bad faith in the decision to demote or if the demotion was made without following correct procedure (of 2 notices and hearing), then he or she may raise the legality of the demotion with the labor arbiter.

      I hope that this helps.

      Reply
  5. anothoy p.

    Hello Atty.

    There was a newly created department wherein our company’s boss had verbally assigned me to be the officer of that particular department. Just to give you a clear picture, the company solely runs on operations then there was this new department. After several months, our boss resigned and the department was shut down. By this time, I am receiving my payslip under the officer position and I have all evidence such as business cards and the emails with my signature as an officer.

    I was just recently put back to operations and I am currently doing the job of an entry level employee. Moreover, the new management is questioning me on why I still use the officer status in my emails or when I represent myself. They are currently trying to change back my payslip and status to the entry level position.

    I have a few concerns, first, is it legal for them to place me back on entry level status? Since I got documents stating that I am already an officer, I think I have the right to be placed in a position with almost the same status as an officer since I performed my duties well and I had no misconduct whatsoever. Do they have the right to change my status back to entry level while my boss gave me a verbal contract of being an officer?

    I also wanted to know if they have the right to terminate me since I have been away from operations for a long time and I developed my skills in a totally different field. I am very concerned since they may say that my skills are no longer required although I am already been in this company for almost three years and again I had no bad records.

    Finally, is it possible if I can file for damages? I have been placed in a different department and I am championing it for a long time and suddenly I was being brought back to entry level. I feel that there is some misleading that happened and I believe that I can sue them for it.

    Reply
    1. Christine Florido Post author

      Dear A:
      Private reply via email will be sent due to nature of inquiry.

      Note Legal Disclaimer of this website.

      Reply
      1. anthony p

        Hello,

        I just wanted to follow up on the feedback that is supposed to be sent to my email?

      2. Christine Florido Post author

        email sent

  6. MAAG

    Dear Atty.,
    I went on a maternity leave recently. When I came back from work I was transferred to another position, with different job description. Moreso, I am no longer handling my department and is now just doing documentation on a project assigned to me. My boss said that staff complained about my leadership style while I was out and that she has lost her trust in me to run the department. However, I was not given any letter/complaints of my staff nor was there any memo stating my transfer. I told them that what they did was a demotion and they said that its merely a transfer. Though, there was no deduction in pay, my position is still the same, my responsibilities are completely different, on top of which I am no longer handling the department. In addition, they have posted my position as vacant way before I returned for work. It was posted in the company;s website, and sent in an email to employees (open for internal application). Is this right? I reiterated my request for the complaints, critical incidences, but nothing was given. Do I have strong grounds to sue? Is it better to resign and then file a case in labor or file a case in labor and then wait to be illegally dismissed?

    Reply
  7. Saints

    Hi Atty.,

    Today I received a notice from our HR informing me of my demotion and transfer to a different team with effectivity being retroactive from the 1st of this month. According to them, this was based on the result of the yearly appraisal given to each employees. They have not presented my of any justifiable reason. And based on your previous replies, I was not given due process. What should I do?

    Reply
  8. Siphelele

    Hi

    What if the employer has followed all the processes and the employee is refusing to comply. Can the employer dismissed the employee for failure to get domoted

    Reply
    1. Atty. Post author

      Siphelele:
      When an employee does not agree to a fair and lawful demotion, he or she will most likely not perform the duties of his or her new position. This failure to perform duties and obey lawful instructions may constitute grounds for dismissal as insubordination. Again, the rules of termination will have to be observed because there is no outright termination in Philippine labor laws.

      Reply
  9. Kris Prado

    Hi,

    Our company is in freeze hiring, the boss asked me to be assigned to department B “temporarily” due to lack of manpower. Initially our conversation was me being assigned to department B, but just as an added function to my job so I agreed. Just recently a colleague told me there was a letter(and I saw it) to the HR about me being transferred to department B. The job in department B is far from my skills and that of an entry level and would derail my career path. Seems to me that “I was demoted” in a way.

    There’s not much workload in my original department due to some reasons, that’s why I accepted the “temporary assignment”. But having me transferred to another department “formally” and to appear in my 201 file is quite unreasonable for me.

    What can I do about this? I belong to department A (as an officer), and being transferred to department B, considering its job description is way far from what I really do is demeaning to me. The staff of department B are entry levels. Although the salary is still the same, it’s the career path I am most concerned of.

    Reply
  10. tibet04

    Hi Atty,
    I have a girl friend, she has been working as a manager for a Dunkin Donuts for 5 years. It is a franchise store. There is a possiblity of her being demoted to an employee level with a pay reduction. The reason is the company thinks her wage is higher and they want to hire other managers whose wages are lower than hers. There is no write ups, no notices. They have been trying to create some conflicts, giving her hard times. There is no complaint against her from any customer or from any employee. Everyone is happy. If so they demote her, does she have write to dispute for grievance or sue them?. Does the employer have the right to do that? Your help would be great. Thanks a lot.

    Reply
    1. Atty. Post author

      Tibet: The proper procedure for demotion will surely give her the opportunity to defend herself and object to the planned demotion. If a demotion actually takes place without the proper procedure being implemented, then she may question its legality in the Department of Labor. But before that happens, there is nothing illegal yet with what seems to be happening. Conflict is usual for as long as it’s not discriminatory and bad intentions are difficult to prove unless someone from top management actually confirms it.
      I hope this helps.

      Reply
  11. Chris

    Hi Atty,

    I’m a Quality Analyst in a BPO contact center company and had just came back from a two-month maternity leave. I was advised by my Manager that there is a possibility that I will be transferred to a new account/department with a different role which is specifically being an associate (the ones who do calls) since another QA is not already needed in our account in which I’m already an excess resource. I agreed with this since I was instructed that this is only temporary until they have looked for another post for me with similar role. However, after a week of taking calls in a different account, I received another verbal instruction from my manager that I will be transferred to a new account again still as an associate in which he said that there is no guarantee if it’s temporary or permanent. He had not really assured me of anything. I had talked to our HR dept regarding this however they said that this can happen since my position as a QA is only a lateral transfer and my allowances for this position can be taken away as well, because the requirement for the said role is already not needed. I had not received any formal letter informing me of this transfer or changed of role but they expected me to take the 3-week training for the new account and then do calls as an associate. I feel that I’m really been demoted, no matter how the company insist that what they’re doing is justifiable. I would like to ask an advice from you Atty. What can I do about this treatment? I have been a very dedicated QA and been cooperative with the company as far as my performance is concerned. I haven’t done any grave offense to deserve this. What I only did was to take legal maternity leaves and when I came back I’m no longer a QA. Please advise. Thank you.

    Reply
    1. Atty. Post author

      Chris: sent a reply directly to your email address. Please check.

      Reply
  12. Carlito *****

    Dear Atty. Florido,

    Good day, I am the Administrative Officer (15 years) of a branch located here in Cebu. Last January 2011 the management wanted me transfer to the Head Office to fill in the vacant position of an Accounting Staff. I wrote a letter to the management that filling in the said position is tantamount to my demotion, not withstanding the fact that my monthly housing/relocation allowance will be stopped since I will be returning to the Head Office. I was assigned here from the Head Office in 1996, my last position in the Head Office is Material Management and Control Supervisor and now with this turn of event I will be backed at the Head Office for an Accounting Staff position. I wrote a letter to the management last March 7, 2011 that the transfer will mean a demotion in my part though the salary still the same. The management give their reply that there was no demotion since it is only a lateral transfer. As what I knew lateral transfer is a management prerogative and such refusal will mean termination and dismissal.

    With this, I am hoping that you could enlightened me on this issue.

    Sincerely,

    Lito

    Reply
  13. Mark

    Hi Atty,

    I sent out an email. I hope and pray that you could answer some of my questions within the week.

    Reply
  14. Jenny

    Hi Atty,

    My husband is working for less than a year now as a operations manager. Last Friday, when he is requesting for some test products, he was informed that he no longer has the right to do so since he is no longer the manager. Right there and then, he learned that he was demoted from operations manager to a supervisory position. This Monday, he has inquired with their HR people and learned that this was because of 2 complaints filed against him. Based on the above correspondences, I am aware that this is illegal as this has not undergone due process aside from he was not properly notified beforehand. I want to know what are the courses of action available for him and how long will the process take.

    Thank you.
    Jen

    Reply
    1. Atty. Post author

      Jen: A complaint for constructive dismissal (illegal dismissal) arising from a demotion without due process may take several weeks to a few months. I suggest that your husband know for sure if he was indeed demoted, or merely deprived of certain authorities pending the investigation of his 2 complaints. His payslip and interoffice memos can give you an idea of his actual status. I hope this helps.

      Reply
  15. tj

    What can/should I do if I feel ive been demoted wrongfully

    Reply
    1. Atty. Post author

      TJ: Your first step is to consult a lawyer about your situation, showing all the documents relevant to your employment and perceived demotion. The lawyer should be able to gauge whether you have basis for questioning it the DOLE. From there, you will be advised on your next steps.

      Reply

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