HR 31 March 2017

How to handle a business relocation with employees

Employers are not obliged to pay business relocation costs unless this is included in the employees’ contracts

Here, Peter Done, founder of Peninsula HR, provides advice for smaller employers for handling a business relocation, following the news that many city firms have responded to Article 50 by moving abroad.

A growing number of leading City firms have revealed they are now laying the foundations for an exodus of thousands of jobs from London after Britain’s vote to leave to EU.

Just days after Theresa May formally triggered the process for Brexit it was confirmed that the insurers Lloyd’s of London are setting up subsidiaries outside the UK, while the investment banks JP Morgan and Citigroup are actively exploring the business relocation of key operations.

So how should a small employer handle business relocation with their employees?

The location where an employee carries out their work is a term of employment which makes up part of the contractual arrangements between employer and employee. To change that location can mean that employers are changing a term of the employee’s contract and this requires agreement from the employee.

To effectively force an employee to relocate in an unreasonable manner could potentially allow them to resign and claim constructive dismissal.

The first step employers should take is to look at the existing contracts of employment for a ‘mobility’ clause. A mobility clause reserves the right for the employer to enforce relocation on employees.

Where the employee has signed their agreement to their contract of employment, this will mean that employers are entitled to invoke this clause and expect that staff will move within the limits stipulated in the mobility clause.

However, mobility clauses must be drafted within the realms of reasonableness if they are to have any power, and the geographical location stipulated within a mobility clause will have an impact on this.

Asking employees to move a distance that is outside of the radius in the mobility clause such as aboard or wanting the employee to move where there is no mobility clause in operation would constitute a variation to the terms and conditions of their employment.

This can only be effected where there is agreement from the employee so a process should be used to obtaining. Employees should be consulted with so that they are aware of what the employer is planning, giving them opportunity to consider the proposals and approach the employer with any concerns.

If agreement is obtained then employers may proceed with the move, or if employees are consulted with and the employer receives neither agreement nor objection, then they can probably assume, after some time, that the employees have impliedly agreed to it.

However, if an employee were to actively object to the change and it was still enforced, it may be open to them to leave the company and claim constructive unfair dismissal.

This would mean the employer having to convince a tribunal that the business reasons for relocating to somewhere that far away were good enough to warrant the change to the contractual place of work.

Employers are not obliged to pay business relocation costs unless this is included in the employees’ contracts. Even so, employers may wish to consider covering some costs, such as temporary accommodation, moving expenses or reimbursing money spent on travel to the new location until they managed to move house.

Peter Done is managing director and founder of Peninsula HR

Find out how employers can protect against unfair dismissal claims

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