Relocation, relocation, relocation: legal issues when relocating staff in large numbers

relocating staff (HSBC)
HSBC is reportedly offering incentives for staff to relocate to Birmingham. But what options do employers have if employees refuse to move? Photo: Sebastien Salom-Gomis/SIPA/REX/Shutterstock

As office rents increase, organisations are considering relocating staff in significant numbers to new locations. Nick Le Riche of Bircham Dyson Bell advises on employers’ options should staff refuse to move.

Recent reports stated that HSBC is offering its staff bonuses of up to £2,500 if they are able to persuade their colleagues to relocate to its new retail and banking headquarters in Birmingham. This bonus was on top of HSBC enhancing its standard relocation package to include added support for housing and schooling.

But what happens if this type of incentive does not have the desired effect? Can employers force employees to relocate? And, what can be done if they refuse to move?

Contractual position

A proposal to relocate an employee could arise due to a redundancy situation, but if an employer does not want to go down this route what are the alternatives? The starting point when looking at an employer’s right to relocate employees will typically be the employee’s employment contract.

The location of an employee’s place of work is normally expressly set out in their contract and a place of work or, where the employee is to work at various places, an indication of that must be provided in writing to an employee.
Where the contract is silent on the place of work then this may be implied into the contract to reflect the employer’s business needs or through custom and practice based on the employee’s usual workplace.

Where the employee’s place of work is stated in the contract employers often allow themselves the discretion to move this location within a reasonable area – this is commonly known as a “mobility clause”.

As long as the employer acts in accordance with the mobility clause then it may be entitled to rely on it even if the term itself could be viewed as unreasonable.

However, employment tribunals often look to limit the application of these clauses so that they are only kept to their exact meaning and are not used in circumstances other than those expressly stated.

Mobility clauses may also be limited by the application of implied contractual terms, such as mutual trust and confidence.

In the case of United Bank Limited v Akhtar, Mr Akhtar was told to move from United Bank’s headquarters in Leeds to a branch in Birmingham, which was in the scope of his express contractual mobility clause.

However, he was only given a few days’ notice of his relocation and was not provided with relocation expenses.

The tribunal, in a decision that was upheld by the Employment Appeal Tribunal (EAT), found that United Bank was in fundamental breach of three implied terms: that it would give reasonable notice of the transfer; that it would not exercise its discretion to provide relocation expenses in such a way as to make it impossible to comply with the direction to move; and that it would not undermine mutual trust and confidence.

Where employers do have discretion to relocate employees, the case of HSBC plc v Drage illustrates that such a discretion should be exercised reasonably. HSBC required Ms Drage to move from its branch in her hometown to a branch nine miles away.

The EAT clarified that it is necessary to consider the employer’s business reasons for requesting the transfer and then ask whether a reasonable employer would have concluded that those reasons justified the transfer.

The EAT also believed that in reaching this conclusion an employer was required to take the employee’s personal and domestic circumstances into account.

Refusal to move

If an employee initially refuses to move and there is some uncertainty over whether the contract permits the move, then employers could consider dismissing and re-engaging the employee on a new contract that includes the new workplace.

Provided that the employer gives correct notice under the old contract then the employee will not be entitled to compensation for wrongful dismissal and the employer will be likely to have achieved a variation of contract with the new workplace clearly stated. However, the disadvantage will be that the employer is potentially exposed to claims for unfair dismissal in the event that they have not followed a fair process in dismissing the employee.

If the employer is proposing to use this approach to transfer 20, or more, employees at the same workplace within 90 days then it would also be required to collectively consult with employee representatives about the dismissals.

A failure to correctly inform and consult about the dismissal proposals could lead to the employer having to pay a protective award of up to 90 days’ pay per employee affected.

Where an employee’s refusal to relocate results in the termination of their employment a tribunal will consider whether the employee was acting reasonably in refusing to obey this direction.

In this situation the employer will be expected to discuss the relocation with the employee and consider any objections they have; give reasonable warning of the impending relocation and explore alternative employment. The chances of an tribunal finding that a dismissal is unfair will be increased if the move is not covered by a mobility clause.

Practical considerations

Where an employer envisages that it may become necessary to dismiss employees who refuse to relocate there are some important issues to consider in order to reduce the risks of the dismissals being unfair:

  • consultation with the employees (and their representatives) about the relocation and responding to concerns;
  • whether relocation expenses have been paid and/or compensation provided for increased travel costs;
  • mitigation of relocation such as increased homeworking or other flexible working arrangements; and
  • alternatives options to relocation such as staying within the current office if it is remaining open.

About Nick Le Riche

Nick Le Riche is partner at Bircham Dyson Bell.
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