‘The potion in demotion’

Can an employer fire or dismiss an employee for being inefficient after the employee had become a permanent employee? More often than not, the employer hesitates. Not only because the employer is required to comply with "prior notice and hearing" but, more importantly, the employer must also establish that the employee’s inefficiency constitutes just cause for his dismissal. This, the employer may usually find difficult. It can be argued after all that inefficiency per se is not one of those explicitly enumerated causes for termination of employment in the Labor Code especially for an employee who had acquired permanent employment status.

Does the employer have any alternative? Short of firing the "inefficient" employee, it is said that an employer can resort to demotion as another form of disciplinary action for an inefficient employee. Demotion is defined as the movement from one position to another involving the issuance of an appointment with diminution in duties, responsibilities, status or rank which may or may not involve reduction in salary (Fernando vs. Sto. Tomas, 234 SCRA 552 [1994]). It is the employer’s prerogative to demote its employees to other positions when the interests of the company reasonably demand it (Rubberworld (Phils.), Inc., vs. NLRC, 175 SCRA 150 [1980]. Thus, in one case, an employee was demoted from the position of warehouseman to equipment maintainer. He filed a case for illegal dismissal. The Supreme Court ruled that the complainant was not dismissed. He was only demoted because of his failure to observe proper diligence in his work and also because of indolence, habitual tardiness and absences (Petrophil vs. NLRC, 143 SCRA 700 [1986]).

It must be noted, however, that demotion as an exercise of management prerogative is not absolute. Its exercise should always be for cause and must pass the test of equity, reasonableness and good faith. In case a reduction of salary is necessary, the employer must be ready to show that he has complied with due process requirements prior to the employer’s action and that the demotion is for cause. This is because demotion in office by assigning an employee to a lower position in the same service which has a lower rate of compensation is tantamount to removal, if no cause is shown for it. Moreso, if it is not part of any disciplinary action (Floreza vs. Ongpin, 182 SCRA 692 [1990]). Similar to dismissal, demotion affects the employment of a worker whose right to continued employment under the same terms and conditions is protected by law. Also, like dismissal, demotion is punitive in character. Thus, the employee should be given a chance to contest the same (Gaco vs. NLRC, 230 SCRA 260 [1994]).

If an employee therefore appears to be inefficient in the performance of his present job or position, instead of firing him, the employer may therefore opt to demote the employee as a disciplinary action. And, to reiterate, for demotion to be valid: a) the employee must be given due process: a) he must be required to explain in writing why he should not be demoted; b) the employer finds the explanation of the employee unsatisfactory; and c) the decision to demote must be for cause and the employee must be duly notified of such decision in writing.

(The author is the resident partner of the Cebu branch of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW). He is also a professor of Labor Law at the University of San Carlos College of Law. Cebu City. He may be contacted at tel. #(6332) 231-4223- (6332) 231-1440. Fax #: (6332) 231-3614 or e-mail: [email protected])