2 July 2015

Relocation of Employees: The Risks and How to Manage Those Risks

Employers occasionally have cause to relocate employees from one business premises to another. Whether this is due to structural changes in the organisation, the end of a lease on a property or wanting to consolidate or expand operations, it is important that employers consider the potential risks involved in relocating employees and how to manage those risks to ensure a smooth move.

When an employee enters into an employment contract, the location at which the employment is performed is a critical factor affecting the decision to apply and take the job. However, structural changes in organisations including consolidation or expanding operations of a business can sometimes lead to business needing to move all or parts of their business elsewhere. Although an employer is not restricted as to any decision to relocate its business to new premises, an employer does not have an unfettered right to relocate the employees who usually work from those premises.

Potential Risks

The Courts will not usually allow an employer to change an essential term of the employment contract where the change was not originally agreed by the parties, particularly in circumstances where the contract expressly mentions the location of where the employment is to be performed. If there is no express term in the contract, it is likely that an implied term exists regarding the location of the employment being the location that is agreed between the parties at the time the contract was made. Therefore, employers must be wary that relocation may constitute a potential breach of contract if the employer fails to comply with any express or implied contractual provisions.

While it might be undoubtedly necessary to relocate employees at the time of relocating premises, even if it is the same role at the same rate of pay, the requirement to relocate may give rise to an alleged termination of an individual employee’s employment on the basis of redundancy in that their role at the first location no longer exists and this constitutes a termination of their employment. Employees with at least 12 months continuous service with an employer have a statutory right under the National Employment Standards to redundancy pay if their positions are no longer required to be performed by anyone. Employers do not have to pay redundancy pay in situations where the employer has offered other acceptable employment to the employee and the employee has refused this alternative employment. The role at the new location may be deemed by the Court to be other acceptable employment for this purpose.

In determining the reasonableness of the relocation, the Court will consider a number of factors with a particular focus on the employee’s personal circumstances and the effect of the relocation on their personal and financial situation especially any additional travel time, distance and additional costs in travel.

Managing the Risks

  • Employers should ensure that they incorporate a clause in their contracts of employment that expressly allows the employer to relocate an employee’s place of work and review and vary any existing contracts that do not contain an express clause relating to relocation;
  • Employers should consult with affected employees to try to get the employees to consent to the role at the new location;
  • In any event for employees covered by an industrial instrument, the employer must ensure that they follow any consultation requirements set out in the industrial instrument such as an enterprise agreement or modern award governing the affected employee’s employment; and
  • Employers should also, notwithstanding a contractual right to relocate, consider whether the relocation will result in an entitlement to redundancy pay under the National Employment Standards.
Posted in Legal Advice & Consulting.
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