Can an Employer Demote an Employee Through Restructuring?

Almost all states recognize the doctrine of employment at will. This common law doctrine allows employers to terminate their employees with little or no notice and without cause. Conversely, employees can always terminate their employment without notice and without any reason for termination. However, an employer cannot terminate an employee for an illegal reason. Illegal reasons for terminating employees include discriminatory reasons, exercising legal rights or public policy reasons. Employers can terminate their employees through restructuring their workforce, but they must do so legally.

Employers who use restructuring as a covert method of terminating their employees for illegal and discriminatory reasons face criminal and civil punishment. The U.S. Equal Employment Opportunity Commission, EEOC, is the federal agency responsible for enforcing the equal employment opportunity laws prohibiting illegal and discriminatory employment practices. The EEOC governs employers with 15 or more employees for non-age based discrimination. The Age Discrimination in Employment Act covers employers with at least 20 employees.

According to the equal employment opportunity statutes, employers covered by federal law cannot implement employment practices intended to discriminate against employees and job candidates based on race, religion, color, national origin, age -- 40 and older -- gender, disability and genetic information. Furthermore, employers cannot implement employment practices that have the effect of discriminating against protected classes of workers, even though they were not intended to produce a discriminatory effect.

Under federal law, employers who restructure their employment positions may be responsible for engaging in constructive discharge. The theory of constructive discharge establishes grounds for employees to assert illegal discrimination claims when their employers do not explicitly terminate or discharge them, but instead, utilize employment practices that have the effects of terminating them. For example, an employer who restructures his positions can be liable for constructively discharging his employees, albeit in a non-obvious manner. If he restructures his positions based on illegal and discriminatory factors or his restructuring has the effect of denying positions to certain categories of protected workers, his restructuring is discriminatory and illegal.

An employer who restructures his jobs and eliminates certain positions does not always engage in discriminatory termination or constructive discharge. If budgetary reasons or a change in business purpose leads to a decision to restructure, he may realign his employees in a non-discriminatory manner. An employer can accomplish this by restructuring his positions such that only top executives are terminated. If his top executives are not all one race or another protected class of individuals, his restructuring method is permissible. However, if he restructures or realigns his staff such that only older workers are terminated, his method of restructuring is illegal, since it leads to a job loss for older workers only.