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Employee relocation - a helpful guide for employers 16/07/2014

When asking an employee to relocate, what should employers bear in mind? Patrick Thomas provides some considerations for companies looking to deploy their workers to other countries.

Employee relocation - a helpful guide for employers

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  1. Can you require an employee to move?
  2. Can an employee refuse relocation?
  3. Relocation terms
  4. Making the 'write' move

Can you require an employee to move?

As employer you may have any number of reasons for asking one of your employees to work from a different location. Whether this is a short term move to deal with a lack of resources, an official secondment or a permanent arrangement, it's important that you take proper steps to protect yourself against potential breach of contract or constructive dismissal claims.

It's common to see express mobility clauses written into contracts of employment which purport to grant the employer the power to require the employee to change place of work within a set radius or a city or a particular county or region, within the United Kingdom or even to one or more international locations. Even where there is no express clause, most contracts of employment will be deemed to include an implied mobility clause, though the ambit of such implied terms is less clear, and will depend on what the court or tribunal sees as reasonable having regard to the employee’s seniority, role, past history, the reason for the requirement to move, any compensation proposed, etc. But the existence of such a term is by no means the end of the story.

Can an employee refuse relocation?

If there's any chance that the requirement to relocate may not be welcome to the employee, the employer must tread carefully. Relying on an express or implied term in the contract without regard to the impact on the employee is likely to amount to a breach of trust and confidence, potentially sparking a constructive dismissal claim. A fair process is vital. This means notifying the employee, ideally in writing, of the proposed move and the reasons for it and determining in good faith whether any objections he has to it can be overcome. [We will leave aside for these purposes the practical question of whether it makes sense to relocate an employee against his will - even if the employer notionally has the right to require the move, it cannot be compelled. If the reason why the employee agrees to move is simply fear of dismissal without compensation if he does not, is that a recipe for a happy working future in the new location?].

If this process leads to an impasse then the employer may be within its rights in proposing the employee’s dismissal, perhaps for redundancy if there is no work left in the current location or for 'some other substantial reason' if the requirement to move is for good business reason but the employee still refuses. The refusal to comply with an express mobility clause may technically be misconduct, but that is rarely an argument worth pursuing unless there is clearly no good reason for the employee’s refusal to move, i.e. no adverse impact upon him if he or she does.

Relocation terms

Once the employee has agreed in principle to move, the most important step the employer can take is to ensure that all the terms associated with the move are properly recorded and agreed. It's surprising how often such things are left to the joint good faith of the parties and rather less of a surprise how often that turns out to have been a mistake. There is no substitute for a proper written relocation agreement, especially where the relocation is overseas.

Terms to consider in such a case include:

  1. What currency will be used for the employee’s pay?  Will he/she and/or the employer have any protection against exchange rate or cost of living fluctuations which may greatly affect the value of his salary to him or the cost of it to the employer?
  2. What expatriate benefits will they receive? Common provisions include tax equalisation, tax advice costs, housing, car, schooling, accommodation, the maintenance of NI and/or contributions in the UK, home flight costs and international-level insurances. If the relocation is extended, at what point does the employee move to a local package and lose some or all of these?
  3. How long is the relocation for? If notice can be given to terminate it before the scheduled end, how long? Does that also end the overall employment relationship? 
  4. Especially if the relocation is to a separate group company, how far will the employee be bound by the rules of the local workplace and how far by those of his original workplace? Where there is the potential for inadvertent offence as a result of religious or cultural sensitivities, it may be wise to consider cultural awareness training pre-departure to minimise the risk of claims. Administratively, who will be responsible for performance management and appraisals, to whom should grievances be brought, how is sickness absence monitored? What rights and responsibilities will the employee have? If he/she is a sole representative or agent overseas, what are the limits on his/her authorities?
  5. On the assumption that the employer pays the relocation costs out, are there any limits on its obligation to repatriate the employee when the arrangement ends? Would it still be willing to meet those costs if he resigns voluntarily or is dismissed for gross misconduct? If the employee resigns as soon as relocated, would you seek any reimbursement of the initial costs, perhaps on a sliding scale?
  6. Making the arrangement conditional upon the employee having and maintaining the necessary immigration consents for the country in question. Do you need legal advice from that jurisdiction about this or concerning permissible forms of contract? What will be the law governing the contract of the relocated employee - the home country’s or the host’s?
  7. What level of commitment is to be given that at the end of the relocation there will be the old job or some other slot available back at base? If there is no guarantee, what arrangements would apply should there be no role for the employee at that time? Is there any trial period within which either party can re-wind the clock and reverse the relocation, or once moved, is that it?

Most of these terms apply particularly to overseas relocations, but it can readily be seen that some would be applicable on a smaller scale within the scope of a mobility clause limited to an area or city - who pays any extra travel costs, is the working day shortened to take account of extra travel time, what is the impact on childcare arrangements, what contribution would be made to any property sale and purchase or removal costs, etc?

Making the 'write' move

There are no right or wrong answers to these questions - an employee relocation agreement is just a more complicated employment contract, after all, and the vast majority of the terms will be determined by commercial rather than legal considerations. However, there's much greater scope here than usual for a failure to button down a particular point to come back and bite the unwary and it would be a brave employer which chose to take these things on trust or assume that they could be worked out later.

The wise employer will therefore take pains to commit its views on all these points (and particular circumstances may of course generate others) to paper and obtain the employee’s agreement to them as a prelude to his relocation. Fortune does not favour the brave in this respect.

Patrick Thomas, lawyer - London employment department, Hammonds

Patrick Thomas, lawyer - London employment department, Hammonds

Patrick is a solicitor in the employment team at Hammonds, based in the London office. His particular expertise covers attendance at employment Tribunal hearings, advice on all aspects of employment law, and drafting of contracts of employment, company handbooks and compromise agreements