Moves and mergers: what are the legal implications of staff relocation?

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With large-scale staff movements back in the news thanks to the proposed merger of Asda and Sainsbury’s, what do employers need to consider when it comes to relocation? Luke Green from Hill Dickinson details some practical steps.

As part of the proposed merger of Asda and Sainsbury’s supermarkets, it has been reported that Sainsbury’s head office in London may close and make way for a new, larger joint headquarters in Leeds.

Sainsbury’s has played down those rumours but, if it does go ahead, the move will see the relocation of hundreds of Sainsbury’s staff.

Meanwhile, broadcaster Channel 4 is also considering a short-list of seven major UK cities to create a new headquarters, which is also likely to involve the movement of several hundred staff.

What are the employment law issues and implications of large-scale staff movements and can any lessons be learned from previous large-scale staff relocations?

Step 1: Is it a redundancy?

In many cases, when a business is relocating in part or in whole, there will be a possible redundancy situation.

An employee is dismissed by reason of redundancy if the employer has ceased, or intends to cease, to operate in the place where the employee was employed, or if the employer needs fewer employees to do a particular kind of work at the place where the employee works.

If any of these tests apply, the employer must devise a fair method of selecting those employees whose roles are potentially redundant, and will have duty to consult with the individual employees.

Further, if it is proposed that 20 or more employees will be dismissed by reason of redundancy within 90 days at one establishment, the employer must notify the Department for Business, Energy & Industrial Strategy and inform and consult trade union or elected staff representatives.

This collective consultation process will must commence at least 30 days (if 20 to 99 staff are potentially redundant), or at least 45 days (if 100 or more staff are potentially redundant), before the first of the dismissals takes effect. However, as part of any redundancy consultation process, the employer must consider alternatives to redundancy, such as relocation.

Step 2: What does the contract say?

An employer needs to consider whether it has the right, under the contract of employment, to relocate employees.

An employee’s place of work should be expressly noted in the written statement of employment terms and conditions or employment contract.

Many contracts will also contain “mobility clauses” which give the employer the discretion to alter this work location to a new location within a reasonable area. Although at face value a mobility clause may appear to allow the employer to insist that the employee should relocate to the new place of work, in reality such clauses are usually interpreted very narrowly and often against the employer seeking to rely on it.

The employer must also be careful not to breach its duty of mutual trust and confidence. Even if the proposed move clearly falls within the scope of the mobility clause, this duty will mean that, as a minimum, the employer must usually give the employee plenty of notice of the proposed move and consider providing financial assistance to meet any relocation expenses.

The employer’s business reasons for the transfer and the employee’s personal circumstances are both relevant in assessing whether the employer has acted reasonably.

Step 3: Can you persuade employees to relocate voluntarily?

Relocating existing staff is more likely to be good for business. To ensure continuity, an employer will almost always want a proportion of the existing staff to relocate.

In addition to providing financial assistance to meet the expenses of moving, an employer may wish to offer an additional financial incentive to encourage staff to relocate voluntarily and compensate them for the disruption to their family life (such as changing their children’s schools).

Although at face value a mobility clause may appear to allow the employer to insist that the employee should relocate to the new place of work, in reality such clauses are usually interpreted very narrowly and often against the employer seeking to rely on it.”

Offering a relocation bonus can greatly increase the proportion of employees that voluntarily relocate, whilst also saving on redundancy costs and recruitment and training costs for replacement staff. Voluntary relocation also reduces the risk of expensive, time-consuming legal disputes. Handled well, a voluntary relocation programme can be very cost-effective.

Step 4: What about employees who are reluctant to relocate?

If an employee is reluctant to move voluntarily, the employer will have two main options: either to make the employee redundant and make a redundancy payment; or to rely on a contractual mobility clause to instruct the employee to move to the new workplace, and if they still refuse, dismiss the employee for refusal to obey a lawful order (which is an act of misconduct).

However, whichever option is chosen, the employer must follow a fair process and will be exposed to the risk of claims (including unfair dismissal).

If the employee has been dismissed for failing to comply with the instruction to move to a new workplace, the tribunal will consider whether the employee was acting reasonably in refusing to relocate.

For example, in Kellogg Brown & Root (UK) Ltd v Fitton, the EAT upheld the tribunal’s finding that the dismissal of two employees for failure to relocate had been unfair because, in the circumstances, the employer had not been entitled to rely on the mobility clause, so its instruction to move had not been reasonable and the employees had reasonable grounds to refuse.

How to ease the transition

Due to the difficulties employers can face in relying on express mobility clauses, particularly with middle management and junior employees, and the fact that the further the distance, the more likely that the employee may refuse to move, means that most large-scale staff relocations are conducted largely on a voluntary basis.

Instead of seeking to force staff to relocate against their wishes, incentives such as relocation bonuses and moving expenses should be offered to encourage a good proportion of the existing workforce to move voluntarily.

This approach can prove very successful – according to the National Audit Office, when part of the BBC moved to Salford in 2010, 38% of the existing workforce voluntarily relocated.

Adopting an approach that is more carrot than stick can lead to better employee relations and a vastly reduced risk of expensive and time-consuming legal claims.

Luke Green

About Luke Green

Luke Green is a partner at Hill Dickinson
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