As far as I can tell, granting someone a title automatically removes their council position. There are situations where this would cause them to be ineligible such as Court Chaplaincy or no longer being your vassal and this is just a way to cover all of them.
If the character in question is still eligible with their new title and you still want them on your council (you probably do- they're as good as before but now they like you for giving them a title) you can rehire them. It may take a few days for things to update, so run the game for a bit if you don't see them right away.
I'll mention that I've never seen anyone actually get the "Fired From Council" malus from this, whether I've re-hired them or not. This might be a change, or you may be confusing it with the Powerful Vassal or perhaps the Ambition malus.