Thanks for your question!
This could be construed as constructive dismissal if there is no record of progressive discipline and/or if there is a significant reduction in compensation or responsibility.
If you have been transparent and have taken every effort to coach, communicate and address any deficiencies with the employee, making an offer of a demotion instead of termination can be a good option. If you haven’t, there are risks of a constructive dismissal or wrongful termination.
One final note: the chance of a successful transition after a demotion is rare. Egos can be bruised, etc.
This webinar may help guide you.