So in a recent session something unusual happened and since I've GM'd for this group in the past it made me wonder what I would have done if I was the GM, and I found that I didn't know. So here's what happened.

It's our 3rd Session with new characters, except our Engineer who brought their Rebel character into the new game, so they still have Duty. The party got all split up on this planet with "primative" humans (swords, bows, castles, etc), and the Engineer became very popular with one of the native leaders. While the party is split up, both sides relay information to each other through the R2 and Tactical droids on the ship. My character (a Mystic) and the Bounty Hunter team up with a group of rebels trying the remove the Empire from the planet. The Engineer had a chance to join up with the rebels but decided to stay with the native leader. So coming up to the dramatic final battle the party is split up. The native leader ambushes another native leader working with the Empire, so the rebels also attack. The Imperial captain is wounded, and their Lieutenant incapacitated so they surrender. The native leader working with the Empire is defeated. A short time after the battle ends, the native leader is about to leave when the rebel leader demands that the Engineer returns with them, the native leader kills him, and is about to leave, when my character, who sees this as unjust challenges the native leader to a duel (the native leader happens to be a master swordsman), the Engineer points their gun at the Bounty Hunter to stop them from interfering, and makes it clear that they would only intervene if the native leader looked like they were about to lose. So 3 rounds of combat later my character is unconscious having only done 7 wounds (6 from harm) and 1 crit, while suffering 2 crits and 13 wounds. The native leader follows this fight up by killing all the rebels and imperials, except for one Imperial. Then back at the leader's castle they Engineer tries to explain that the Rebels are good people, and by this point all the rebels on the planet are dead.

So at the end of the session, the GM had forgotten what the Engineers duty was so they asked, the player said support, and I said offhandedly that I thought it was Support to the Rebellion. The GM agreed with that, and said that the characters duty should drop by 5, the player seemed horrified. They seemed to think that the reduction meant that the character had committed treason, even after it was explained that this wasn't the case they still didn't seem happy about it, saying that they had intended to help the rebels (citing that they had giving them information), but the GM said that they had a few chances to give more help, and even save the rebels, but sided with the native leader, thus the reduction. It was decided that it would stay the same since the player was distressed by it.

So what do all the GM's and players out there think of this scenario, and the more general idea that some actions or in-actions might result in a characters duty being reduced?

Duty shouldn't drop for simple failure. Nor should it drop for being out of specific duty.

It should drop for disobeying orders in a flagrant manner, for treason, for acting against the good of the alliance, and for failure with waste of rebel resources.

Simple failure is a fact of military life. It's only when you fail to mitigate the failure by wasting resources that it should drop... You take a squad in, and despite knowing it is a suicide run, you come back but the squad doesn't, AND you failed the objective.

"Support" means helping other characters to fulfill their duties.

That said, the problem here doesn't appear to be Duty. Judging by what you've said, the Engineer character is going lone wolf and actually turning on the party at points. That's a much bigger problem than the game mechanics implications.