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Relocations That Move Into Legal Quagmires

Something as seemingly simple as a corporate move can trigger any number of legal difficulties.

November 9, 2001
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Related Topics: Miscellaneous Legal Issues, Relocation Management
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Relocation isn't normally associated with litigation. Yet the issue isn't as cut-and-driedas many HR professionals think. Something as seemingly simple as a corporate movecan trigger any number of legal difficulties. Robert W. Sikkel, a partner in theHolland, Michigan, office of Warner, Norcross & Judd LLP, offers the dos anddon'ts of employee relocation.

To begin with, how much control does an employer have over whether an employeerelocates?
That's a common question: Can you force or require an employee to relocate?The answer is almost always no. It can't be required. Occasionally you'll havean employee who is hired with the understanding that he or she will be movedaround the country as part of training or the business practice. You see thata lot in retail with managers and assistant managers. And while it would beunderstood that the employee should take the relocation, there's no way youcan physically force them. But most of the time, when the relocation comes,the employee has not necessarily anticipated it or agreed to it up front. Therefore,an employer needs to present the relocation as if it is the employee's (only)option to remain employed by the company.
How do you present this relocation ultimatum?
Typically it would be approached conversationally with the individual. Theopportunity to relocate would be presented. Employers should also think aboutthe alternative. If the employee declines the relocation, then be prepared toaddress the status of that individual. It likely means the employee loses hisor her current position. So HR might then offer some severance pay, and typicallyalso ask for a waiver of claims in exchange for the severance pay. So the employeeshould be presented with a good-faith option to either stay with the employerand accept the relocation, or -- you need to fill in the blank as to what theother choice is.
So if the employee refuses the relocation, HR should have that person signa waiver?
If the employee doesn't take the relocation and instead accepts some sort ofseverance package, that all needs to be documented, and the release must bein accordance with applicable state and federal laws today.
How else should an employer protect itself from an employee who loses hisposition because of his refusal to relocate?
That comes up in the area of forced relocation. For example, the employee declinesa move to Montana. The employee's position at the company is then forfeited.The legal question at that point is, what has just happened? The typical modelis: when an employee leaves a company, he or she either quits or is fired. Theemployer might say, "I did not terminate this employee. I offered thisemployee another alternative, and this employee said no. This employee quit."The employee says he didn't quit. By requiring him to take a position milesaway in a different state, the company created a circumstance where -- whilehe wasn't specifically fired -- constructively that's what has happened.
And what's the significance of the employee's termination claim?
The significance of that is, No. 1, an employer should recognize that simplyterminating the employment after offering relocation doesn't automatically meanthe employee quit. And it does not alleviate the potential for challenges likeconstructive discharge. Most times, this kind of claim will arise when someone'spay or benefits have been so significantly reduced that, although they're stillemployed, it's not with the same function, status, or pay. That's the most commonpattern. But asking someone to uproot and relocate could give rise to the samething.
If the employer is choosing specific employees to relocate, does a companyhave to be aware of their race and gender?
If it turns out that all the employees who have to move to Toledo are womenor people of color, that's grounds for a disparate-impact claim. Absolutely,it happens all the time. If, during a relocation, some employees are being allowedto stay in the office, while others are being relocated, that should reallybe assessed. Who is getting the option to stay and who isn't? Look at all theprotected categories -- race, age, gender -- to make sure these people aren'tthe ones being forced to relocate.
If an employee does accept a transfer, what are the company's legal responsibilitiesas far as paying for or assisting in the relocation?
There are no state or federal requirements as far as what you must offer onrelocation. It's left to employers and their policies and their practices exclusively-- including any prior contractual arrangements with the employee.
What about in a merger or takeover situation, in which your employees arebeing required to move to a new city -- what's the responsibility then?
Generally you'd work that out during the merger as to which of the policieswould be applicable. You'll see that a lot, where you have a collision of policiesdealing with things like severance pay. Usually the merger agreement itselfwill dictate it.
What if an employee relocates, but then must be let go after the move occurs?
Those are common areas of challenge, where the employee relocates and in ashort period of time their employment is terminated at the other end. Managersneed to be careful not to overcommit to the job security of the employee post-relocation.So the first step would be to avoid verbal overcommitment. Second, avoid anywritten overcommitment in any transfer or relocation letters. So make sure therearen't contractual commitments made to the employee. This is true even if yourcompany has an at-will employment policy. We're seeing areas where misrepresentationcan legally negate even at-will employment policies. So the greatest cautionto an employer on transfer is not to overcommit.
What if the company relocates an employee and that person quits soon afterthe move?
That's a question we've been receiving a lot in the last nine months, as theeconomy has changed. If an employee quits after the company spends thousandson their relocation, can the employer recoup those expenses? More and more employersare developing or contemplating arrangements to address that issue. They dealwith time period: If you stay in this position for at least a year, I'll forgivethe relocation expenses. If you stay for three years, for every year worked,I'll forgive a third of it. This is normally for the employee-driven move orthe recruitment of new employees. A year ago, employers weren't thinking aboutthis -- they were just happy to fill positions. As the market is changing andemployers view the cost of relocation as potential risk, they'll address thatnow.

The information contained here is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

Workforce, November 2001, pp. 70-71 -- Subscribe Now!

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