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Demotion….Is it Legal?


The case of Norkis Trading Co., Inc. vs. Melvin Gnilo[1] defines “demotion” as a situation in which 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.


In the Philippines, the Courts have recognized that management has considerable latitude in regulating all aspects of employment, including the freedom to transfer and reassign employees according to the requirements of its business.


However, the transfer of an employee may constitute constructive dismissal when it amounts to “an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.”[2]


From the foregoing, you might infer that a demotion constitutes constructive dismissal; and if that is indeed so, how is it that many companies regularly ‘get away with’ demoting employees?


Well, to clarify, demotion only constitutes constructive dismissal when no reasonable or valid cause is shown for demoting the employee, or when said demotion is an act of clear discrimination, insensibility or disdain by an employer.


In fact, the case of Danilo Leonardo vs. National Labor Relations Commission[3] provides that the right to demote an employee falls within the prerogative of the management. The Court held, however, that the due process required by law in dismissals also applies to demotions since these 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 dismissal, be given a chance to contest the same.


In sum, as long as there are reasonable grounds for demoting an employee and said demotion is coupled with the twin-notice requirement, demotion is allowed and does not constitute constructive dismissal.


Atty. Cindy Climaco

[1] G.R. No. 159730, 11 February 2008

[2] Benguet Electric Cooperative vs. Josephine Fianza, G.R. No. 158606, 09 March 2004

[3] G.R. No. 125303, 16 June 2000

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