Demotion may seem an attractive solution for poorly performing employees. On 1 October 2013 the Court of Appeal in Den Bosch ruled on the acceptability of a demotion and its requirements.

What happened?

The case concerned an employee who, in the course of many years of employment with Océ, had moved up to team leader with function level 24. During various appraisal meetings from 2007 onwards, the employee was told that him coaching his team members did not go well and that when problems occurred he did not contact the management quickly enough. Nevertheless, the final conclusion was always “good” or “very good”.

In October 2012 Océ informed the employee that he would be demoted to function level 23 as per 1 January 2013. His salary would be reduced over a period of five years to the corresponding level. Océ brought forward that the reason for this decision was that the points for improvement discussed had turned out to be “crucial points of failure”. The employee did not accept his demotion and initiated summary proceedings, claiming his previous position and salary.

The Subdistrict Court of Den Bosch rejected his claims, but the employee lodged an appeal.

Judgment of the Court of Appeal

First and foremost, the Court of Appeal made clear that the demotion at hand came down to a unilateral amendment of the terms of employment. Such an amendment must be tested against the criteria brought forward by the Supreme Court in Stoof/Mammoet (Supreme Court 11 July 2008, ECLI:NL:HR:2008:BD1847).

The first question to be answered in this framework was whether there were changed circumstances on the basis of which Océ, acting as a good employer, could have found reasons to make the employee a proposal concerning an amendment of the terms of employment. The Court of Appeal is of the opinion that it does not.

It is true that the appraisals of the employee showed specific points of improvement. However, they did not include any clear arrangements about improvement of these points. The employee was given the opportunity to work on his points of improvement, but the employer never stressed the urgency of these points, nor specified the way in which such improvement should be reached and the same is true for the period in which the improvements should have been made. This argument is even more convincing because the overall conclusion was “very good” or “good”, so that the employee had not been warned sufficiently.

These circumstances and some other less relevant circumstances led the Court of Appeal to the conclusion that Océ could not have demoted the employee without first offering the employee an improvement plan. In the absence thereof, there were no changed circumstances in which Océ, acting as a good employer, could have found reasons to make the employee a proposal about an amendment of the terms of employment.

Lessons

This judgment provides us with some important lessons:

  • A demotion cannot be upheld easily. The courts will test the demotion against the criteria from Stoof/Mammoet. Before an employer decides to proceed to a demotion, the employee should have been given the opportunity to go through an improvement plan.
  • Océ had mentioned important points of criticism in its periodic appraisals. However, these points were not reflected in the overall conclusion and no action had been taken on these points. The judgment underlines the importance of appraisals, but not only as paper tigers. Both the employer and the employee should actively work on the points of improvement that are mentioned in an appraisal.
  • Demotion is not impossible. It should, however, be very carefully prepared and carried out. The test used in this case by the Court of Appeal, is effectively the same test that would be used for a dismissal: was the employee performing poorly and had the employee been given the opportunity to improve?