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Relocation: navigating the risks and pitfalls for employers

2nd August 2023

Relocation: navigating the risks and pitfalls for employers

Due to changes in ways of working since the pandemic or in response to the economic slowdown, some employers are downsizing their premises and asking employees to consider relocation to new premises or hubs.

‘Even if the change in location only involves a short distance, employers need to consider the impact this will have on individual employees,’ says Sarah Everton, Head of Employment with Myers & Co. ‘Any relocation programme needs to be well planned and to include plenty of time to consult with staff. Employers may need to brace themselves for loss of staff and the risk of unfair dismissal claims. As the closure of a place of work is categorised as a redundancy situation, in some circumstances, employers may also need to budget for redundancy costs.’

Sarah Everton hightlights the key contractual, redundancy and discrimination issues.

Contractual mobility clause for relocation

The employees’ contracts of employment may contain a mobility clause that allows the employer to change the place of work. Occasionally, this is implied into the contract. Either way, this does not give the employer carte blanche. Firstly, the wording needs to be carefully checked to understand the scope of the right, for example it may only allow relocation within a reasonable commuting distance. The wording also needs to be clear.

Secondly, any employer’s right to insist on relocation may be restrained 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 individual circumstances.

For example, there may be a breach if the change of location requires:

A breach could allow the employee to resign and claim constructive dismissal if they have two years’ service.

Thirdly, an employer needs to enforce this clause in a reasonable way. Usually, that involves discussion with the individual and giving plenty of notice. 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.

Finally, 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), this hurdle should be cleared.

Mobility clause and employee refuses relocation

If the employee resists the move, even though the contract allows the employer to require the employee to relocate, the employer may have to dismiss the employee for failure to obey a lawful instruction. If the instruction was not in breach of contract, the dismissal for misconduct would be 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 needs the employee’s agreement to the change through a consultation process. 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 unfair dismissal claim, should you have to dismiss an employee who does not agree to relocate at the end of the consultation. We can also advise you on whether or not the circumstances trigger the requirement to consult collectively, as well as individually.

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 per cent.

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 may be some uncertainty around the employee’s place of work, for instance if they work at two bases. We can discuss this with you.

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.

Discrimination issues

The consultation exercise should address any individual circumstances that could create a discrimination risk. This could involve reasonable adjustments for a disabled employee or the impact of the move on childcare arrangements for a female employee. Employers need to be alert to these issues. Please talk to us if these issues come up.

How we can help

A relocation programme can be disruptive and may create the risk of employment tribunal claims and loss of staff. We can help you ensure that it is well-planned, and the risks are mitigated as far as possible, to minimise the negative impact on your business.