Relocating a workplace opens a whole can of worms in terms of employee rights to redundancy and extra payments. Consider all the options if your move is to be a success.
hen a business is closing down and employees are dismissed, it is clear that the dismissals are redundancies. The legal position is not so clear when the workplace is closing, but the work is being relocated to new premises. Can employees be required to move with the business or are they still redundant? Are they entitled to redundancy payments? Does it make any difference if contracts contain mobility clauses? Employers need to think about all these issues and about how to handle the transfer of work if a relocation is to be a success.
Scenario one: mobility clauses and redundancy
Company A is moving its headquarters from Birmingham to Derby. Anthea, a mid-ranking executive, has a mobility clause in her employment contract. Can she be required to move with the business? Is the position different if she is unwilling to move because her husband will not be able to get a job in Derby?
Anthea will be redundant if she is dismissed because Company A stops carrying out business where she was employed. A tribunal will determine where Anthea was employed as a matter of fact. Her place of employment is likely to be Birmingham, despite the mobility clause. If she is dismissed because of the closure, she will be entitled to redundancy payment.
Company A could seek to require Anthea to relocate to Derby and then dismiss her if she refuses. It could then argue it was because of her breach of contract (failure to comply with the mobility clause). However, the tribunal will be unwilling to defeat a claim for a redundancy payment simply because of the terms of the contract (see High Table v Horst), so better view it that it is likely to be redundant.
Existence of a mobility clause may make it easier for Company A to argue that Anthea has been offered suitable alternative employment and that by refusing the redeployment she has forfeited her right to a redundancy payment.
Company A should also be aware of the possibility of an indirect sex discrimination claim if it dismisses Anthea for refusing to move to Derby.
As men are still more likely than women to be the main earner, imposing or seeking to enforce a mobility clause may be discriminatory. Company A needs to take into account Anthea’s reasons for not wanting to move before deciding whether it can justify requiring her to move.
Scenario two: relocation and suitable alternative employment
Company A would also like Basil, one of its technical staff, to move to Derby, although he does not have a mobility clause in his contract. Company A knows that Basil lives about half-way between Derby and Birmingham and that he drives to work. Will Basil forfeit a redundancy payment if he refuses to transfer to Derby?
Under the Employment Rights Act 1996, an employee forfeits his right to a redundancy payment if he unreasonably refuses an offer of suitable alternative employment.
It will be for the employer to show that the new job constitutes suitable alternative employment. This will be assessed by reference to objective factors such as job content, pay, hours and workplace.
Cases indicate that a change of workplace is not likely to mean that a job offer is unsuitable (see Gotch & Partners v Guest). In this case, as long as the role Basil is offered in Derby is the same as that performed in Birmingham, it is likely to be suitable alternative employment.
(It would also be prudent for an employer to provide assistance with removal expenses to staff who want to move to increase the chances of a job being found to be suitable alternative employment – although probably not necessary in Basil’s case given that his home is equidistant between the new and old workplaces.)
However, an employee could still refuse the offer and remain entitled to payment if he has acted reasonably in refusing. In this case, it will be difficult to see that Basil is acting reasonably. Given that he lives half-way between Derby and Birmingham and drives to work, his mode of transport will not change and his travelling time and costs are unlikely to be substantially increased. He should not have to move house so his family circumstances, such as children’s schooling, are unlikely to be affected. In Basil’s case, a refusal to move will entitle the employer to withhold a redundancy payment.
Scenario three: the impact of a short move
The lease on Company B’s premises has expired and it has found new office space a few miles away. Christine travels to work by bus and the new journey will involve at least two changes and a much longer journey time, which will mean she cannot collect her children from school. Is she acting reasonably in refusing to move to the new premises?
If Christine is dismissed because she refuses to move to the new office, this will still be on grounds of redundancy. A redundancy payment will, in theory, be payable.
However, an offer of employment at the new workplace will almost certainly be suitable alternative employment.
The issue will therefore be whether Christine is acting unreasonably in refusing to move. Company B should not assume that she is being unreasonable just because the move is only a few miles; the issue of reasonableness still has to be assessed by reference to Christine’s individual circumstances. Individual circumstances that may be relevant include travelling time, method of transport, and family circumstances.
In this case, because Christine travels by public transport, the new location will add substantially to her travelling time and the journey will be less convenient. It will also have an impact on her personal circumstances because her childcare arrangements will be disrupted. These personal factors mean that her refusal is likely to be reasonable and she will remain entitled to redundancy.
Company B should not assume that any refusal will be unreasonable simply because the distance involved is fairly short.
Scenario four: how to make a relocation successful
Company C is transferring its business from one site, which will be closed, to an existing site 20 miles away. How should it handle the relocation process?
As far as possible, tell employees about the relocation as soon as possible (depending on the numbers, there may be collective consultation obligations). Late offers of alternative employment may mean that offers are not suitable.
Think about what assistance the company can offer to facilitate moves. Will it provide relocation assistance or a contribution to increased travelling costs? If so, will such support be provided indefinitely, or for a limited period?
Will some sort of incentive be offered to persuade people to move (relocation bonus)? If so what terms will be attached? Will people need to stay for a particular period to be entitled to any bonus?
Employees who are willing to move will be entitled to a four-week trial period in any event. Consider whether the trial period could be extended to give employees additional time to see whether the new location is suitable.
Assess reasons for not accepting alternative employment on an individual basis. Do not assume that all refusals are unreasonable. What is reasonable for one employee may not be reasonable for another.
Kathleen Healy is a senior associate in the employment, pensions and benefits department at Freshfields Bruckhaus Deringer