Consultation with employees is key to success
Now that the Queen’s speech has confirmed the government’s commitment to holding an in/out referendum on Britain’s membership of the EU, “Brexit” has become a real possibility. If it happens, some large multi-national companies may decide to relocate their business or a part of it away from the UK. In this situation would employees be obliged to relocate, and what should employers do about those who refuse to move abroad?
As any HR professional knows, the essence of good employment relations is consultation, consultation, consultation. Even where the law does not require consultation it rarely does any harm. This is particularly the case where an employer is considering relocating all or part of its business abroad.
Contracts of employment, as so often, provide the starting point for managing a cross-border relocation. If there are international mobility clauses in the contracts of employment, the employer is likely to be able to contractually require the employees to relocate – so long as these clauses are enforceable.
There are essentially two aspects to enforceability. The first is whether the mobility clause is properly a term of the contract. For example, if the clause is in in the employee handbook there may be issues over whether it has been properly incorporated in the contract. The second aspect of enforceability concerns the circumstances in which the employer seeks to rely on the clause. In doing so, the employer must act reasonably, for example, by giving employees sufficient time to relocate. The greater the distance of the relocation, the longer the time likely to be regarded as reasonable for employees to organise their affairs.
The employer will also have to provide a reasonable compensation and relocation package sufficiently attractive for the employees to want to relocate and ensure that they do not lose out financially.
But what if employees have enforceable international mobility clauses in their contracts, have been given reasonable notice of the relocation and are offered an attractive relocation package, yet still refuse to relocate? Are they redundant? Probably not, as it is perfectly permissible for an employer to invoke a mobility clause rather than dismiss for redundancy. If employees refuse to relocate then their contracts can be terminated on notice and any claims for unfair dismissal defended on the grounds that the dismissals were for some other substantial reason. Provided the mobility clauses are enforceable and there has been proper consultation with the employees, such dismissals are likely to be held to be fair.
The situation is different if the employees do not have international mobility clauses in their contracts of employment and they refuse to relocate. If the employer intends to stop carrying on the business at the place where the employees worked or requires fewer people to carry out work of a particular kind in that location, there will be redundancy situation. This will require collective consultation if the employer proposes to dismiss as redundant 20 or more employees. Even if fewer than 20 employees are affected there will have to be individual consultation. If the number of employees is between 20 and 99 the consultation must start at least 30 days before any dismissals take effect. If there are 100 or more proposed dismissals, the period is 45 days.
What if the relocation leads to a change of employer? Suppose the employees are no longer to be employed by a UK registered subsidiary company but, for example, by a German company in Frankfurt. In that case TUPE may apply if the transfer is of the entire business or a defined part of it. If the employees have enforceable international mobility clauses in their contracts there will have to be TUPE consultation. Under TUPE, employees have the right to object to a transfer but if they do so they will not generally be treated as having been dismissed.
However, if the transfer involves a substantial change to the employees’ working conditions that is to their material detriment, they are entitled to resign and claim constructive dismissal. There is a real risk that relocation to a different country may, depending on the precise circumstances, amount to such a change to working conditions.
Jeffrey Jupp is an employment barrister at 7 Bedford Row and the author of a blog dedicated to TUPE.
This article was originally published by CIPD.