Demotion as a Sanction

By way of sanction, an employer had demoted an employee to a lower position.
In the absence of an overriding business interest that would justify the unilateral change of the employment contract, however, the Sub-district Court ordered the employer to rescind its decision,.
A currently 28-year-old employee had worked for a fruit and vegetable wholesaler since 2016. She had subsequently worked her way up from production employee to the positions of an operator and an assistant team leader to her current position as a team leader. In August 2022, the employee asked permission to leave work two hours earlier. Despite the fact that the permission was refused, she left anyway. The employer then decided to move the employee back in the position of a production employee including a commensurate decrease in the salary.
When, despite the employee's protest, the employer did not rescind the imposed measure, the employee claimed, in summary proceedings, reinstatement in her original position and payment of the difference in salary. In its defence, the employer then argued that the employee had not functioned properly in various areas since 2019 and that the production process had been completely disrupted by the early departure of the employee on the day in question. The employee denied the latter accusation. According to her, her production lines had been ready and she had handed over her duties before departure. She explained the earlier departure because she had to take her car to the garage. The employer further argued that he could no longer rely on the employee.
The Sub-district Court put first and forward that the content of an employment contract can only be changed with the consent of both parties. Since a clause had been included in the employment contract giving the employer the authority to unilaterally change the terms of employment, the Sub-district Court assessed the presence of a serious business interest that would be legally required to invoke such a clause.
The Sub-district Court concluded that this was not the case. The fact that that the employee had not been functioning properly since 2019, was incredible, since she had been promoted to the team leader in 2021. If the employer already had complaints about the employee's performance, the employer should have offered an improvement process. Furthermore, it had not become apparent that the production process on the day in question had been disrupted by the actions of the employee. The employee’s behaviour was far from exemplary, according to the Sub-district Court but it would have been right and proper for the employer to have looked for less invasive solutions than a demotion. Instead of a structural breach of the primary employment conditions, a temporary correction would have been an option, according to the Sub-district Court.
For that reason, the Sub-district Court granted the employee's claims.

Employment law does not provide many possibilities to impose a sanction. There is a big gap between the written warnings and a dismissal, whether or not summarily. The law still offers the option of imposing a penalty, but this option is hardly used in practice. The legal conditions for imposing a penalty play an important role in this. A requirement is, that the regulations that stipulate a penalty in the event of violation shall be included in the employment contract. Also the amount of the penalty shall be included. Additional requirements for employees who do not earn more than the statutory minimum wage are:
- that the penalty shall not exceed half a day's wages,
- that the destination of the fine shall be stated in the employment contract and
- that the employer shall not benefit from the penalty.
Demotion, whether or not temporarily and with or without a commensurate decrease in salary, would be a welcome addition to the options to impose a sanction, but at least it would require a serious business interest and this is not easily assumed. Yet, in practice it is not impossible to persuade an employee to accept a change to a lower position. If there is a legal ground for a dismissal, reassignment to another position with the corresponding salary is not only a less invasive measure, but it is also a measure that, in principle, the law requires the employer to have investigated.
In its judgment, the Sub-district Court also indicated that a temporary correction of the employment conditions might have been possible. As a less invasive alternative to a demotion with a commensurate decrease in the salary, this may sound sensible on the surface, but a legal basis for a temporary correction of the employment conditions also fails to exist if there is no serious business interest.