Is it proper or even allowed for an assistant manager to be best buds with an employee? The reason I ask is because this employee may have had influence over the manager in an incident involving a demotion.
No. This is due to possible favortism. But whose to stop them off the clock? Someone tried to intervene a couple years back due to the same scenario and due to nothing happening due to no evidence, the person that told, "transferred" to another job. But technically no. Management ARE REQUIRED to NOT have close friendships with another employee in the same store. This also protects the employee if the relationship turns sour.
Umm what do you mean by assistant manager? Do you mean department backup, associate manager, co-manager? If you're talking about the latter two, then stop wasting your time. They usually move to another store within a year. And if it's a backup, they have zero power in demotion. Was the demotion based on merit? Your friend might have been knocked back down because he couldn't meet deadlines or other responsibilities. If we're talking demotion from DH to clerk, then that takes more than the manager going, "Junior says you f*cked up." If it's demotion from cashier to bagger or something like that, then 1. It seems suspicious. And 2. It doesn't seem like something important enough to post. Your details are severely lacking so we cannot help yet.
