Relocation: navigating the risks and pitfalls for employers
There has been significant change in the way many of us work, often reducing the need for office space. Furthermore those trying to cut costs, in response to the economic slowdown, are increasingly looking to downsize or relocate their workspace.
To avoid costly claims, relocation needs to be planned carefully and considerately. We look at the key contractual, redundancy and discrimination issues.
Planning and notice
The location of an employee’s workplace forms part of their employment contract. Even if the change in location is only a short distance, employers need to consider the impact this will have on individual employees.
Any relocation programme needs to be well planned and to include plenty of time to consult with staff. Some staff may choose to resign rather than move location, thereby increasing the risk of unfair dismissal claims. The closure of a place of work is categorised as a redundancy situation, so employers may also need to budget for redundancy costs.
Contractual mobility clause
A good starting point is to consider the contractual arrangement under the contract of employment – is there an express or implied mobility clause allowing the employer to change the place of work? A mobility clause is a provision within a contract of employment that seeks to permit the employer to move the employee’s normal place of work, either permanently or temporarily.
A mobility clause does not give the employer carte blanche to make changes – operating the clause must be done with caution:
1. Check the wording
The wording of the clause must be carefully checked to understand the scope of the right, for example it may only allow relocation within a reasonable commuting distance or time. The proposed new location will need to be considered within this context.
2. Look at the individual’s circumstances
The employer’s right to insist on relocation is likely to be tempered by the implied term of trust and confidence, which stops the employer acting in a way that seriously damages or could seriously damage the relationship between the employer and employee, without having a good reason. Whether this is breached will depend on the specific circumstances of each employee.
For example, there may be a breach if the change of location requires:
- the employee to move house;
- children to change school;
- a partner to change their job; or
- it was not strictly necessary for the employee to change work location, or the impact could have been lessened by hybrid working.
A breach could allow the employee to resign and claim constructive unfair dismissal if they have two years’ service.
3. Consultation and reasonable notice
The employer will need to enforce this clause in a reasonable way. Usually, that involves constructive consultation with the individual and giving plenty of notice of the change. For example, if the employee will have a longer commute, it may be helpful to offer flexibility with working hours to travel at the optimal time of day or to allow working from home on some days.
4. What is the business reason for the move
Insisting on the employee relocating under a mobility clause must be done in good faith and not done in an ‘arbitrary, capricious or irrational’ way. Provided there is a business reason for moving the location (such as being unable to extend the lease of premises), most employers would likely satisfy this requirement.
Mobility clause and employee refuses
If the employee resists the move, even though the contract allows the employer to require the employee to relocate, the employer could potentially dismiss the employee for failure to obey a lawful instruction. If the instruction was not in breach of contract, the dismissal for misconduct is potentially fair and the employee would not be entitled to a redundancy payment.
No mobility clause and workplace still operating
Where the existing workplace is not being closed but some employees are required to relocate, without a mobility clause, the employer cannot insist on the employee relocating. The employer will need the employee’s agreement to the change through a consultation process.
At the end of the process, if the employee still resists, they should be offered a new contract with the new work location and be dismissed from their current contract. This process is commonly referred to as ‘fire and rehire’. The Government is currently considering responses to its consultation on a draft Code of Practice that would apply in these circumstances. It is not known yet when this Code will come into force. As and when it does, employers will need to comply with its requirements or risk any compensation being increased by up to 25%.
We can help you ensure that this consultation exercise covers all the necessary elements, including ways of mitigating the impact on the employee. This will improve your chances of successfully defending any subsequent unfair dismissal claim. We can also advise you on whether or not the circumstances trigger the requirement to consult collectively or as part of a TUPE transfer, as well as individually.
No mobility clause and close of workplace
If the trigger for the relocation is that the business will stop operating from the current premises, this is likely to fall within the statutory definition of a redundancy. There could be some uncertainty around the employee’s place of work, for instance if they work at two bases.
If the circumstances fall within the definition of redundancy and there is no suitably worded mobility clause, the employer should follow a fair redundancy process. The same job at the new workplace could be offered to the employee as a suitable alternative. If the employer makes a suitable offer in accordance with the statutory requirements and the employee unreasonably refuses this offer – and that will depend very much on their individual circumstances – the employee would not be entitled to a redundancy payment.
The consultation exercise should address any individual circumstances that could directly or indirectly discriminate against those with protected characteristics. This could involve reasonable adjustments for a disabled employee or reducing the adverse impact of the move on childcare arrangements for a female employee. Employers need to be alert to these issues.
Change of terms
As with any change to contract terms, a change of workplace location should be evidenced in writing as soon as possible (and no later than 1 month after the agreement to change).
How we can help
If badly managed, a relocation programme can be hugely disruptive and increase the risk of Employment Tribunal claims and staff attrition. We can help you ensure that it is well planned, and the risks are mitigated, to minimise the negative impact on your business.
For further information, please contact Eleanor Rogers in the Employment Team on 01227 763939.
Please note: This article is for general information only and does not constitute legal or professional advice.