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Did you have an employment contract stating that you could only be terminated for cause?
When you say that you feel discriminated against, are you just referring to this demotion based on them wanting to hire a family member, or are you saying that the employer discriminated based on your race, religion, gender, age, disability or FMLA use?
Unfortunately, it is not illegal in our country to expressly discriminate in favor of a family member. Certainly, some government's have passed laws on the issue for government employees and positions, but in the private sector there simply is not any law against hiring family over other people or even demoting something in order to bring a family member into the position.
So, you need to find out about the contract issue, because if you have no employment contract like the one I mentioned, you are an "at will" employee in your state and can legally be terminated at any time, with or without cause. Demotion, being a lesser adverse action than termination, is also permissible "at will" without a contract of employment.
It is unlikely that you have one. They are very rare and you'd probably know if you had one, because they are heavily negotiated in advance.