Relocations That Move Into Legal Quagmires

Relocation isn’t normally associated with litigation. Yet the issue isn’t as cut-and-dried as many HR professionals think. Something as seemingly simple as a corporate move can trigger any number of legal difficulties. Robert W. Sikkel, a partner in theHolland, Michigan, office of Warner, Norcross & Judd LLP, offers the dos and don’ts of employee relocation.

To begin with, how much control does an employer have over whether an employee relocates?

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 moved around 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 be understood 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. The opportunity to relocate would be presented. Employers should also think about the alternative. If the employee declines the relocation, then be prepared to address the status of that individual. It likely means the employee loses his or her current position. So HR might then offer some severance pay, and typically also ask for a waiver of claims in exchange for the severance pay. So the employee should be presented with a good-faith option to either stay with the employer and accept the relocation, or — you need to fill in the blank as to what the other choice is.

So if the employee refuses the relocation, HR should have that person sign a waiver?

If the employee doesn’t take the relocation and instead accepts some sort of severance 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 his position because of his refusal to relocate?

That comes up in the area of forced relocation. For example, the employee declines a 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 model is: when an employee leaves a company, he or she either quits or is fired. The employer might say, “I did not terminate this employee. I offered this employee another alternative, and this employee said no. This employee quit.”The employee says he didn’t quit. By requiring him to take a position miles away in a different state, the company created a circumstance where — while he 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 simply terminating the employment after offering relocation doesn’t automatically mean the employee quit. And it does not alleviate the potential for challenges like constructive discharge. Most times, this kind of claim will arise when someone’s pay or benefits have been so significantly reduced that, although they’re still employed, it’s not with the same function, status, or pay. That’s the most common pattern. But asking someone to uproot and relocate could give rise to the same thing.

If the employer is choosing specific employees to relocate, does a company have to be aware of their race and gender?

If it turns out that all the employees who have to move to Toledo are women or 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 allowed to stay in the office, while others are being relocated, that should really be assessed. Who is getting the option to stay and who isn’t? Look at all the protected categories — race, age, gender — to make sure these people aren’t the ones being forced to relocate.

If an employee does accept a transfer, what are the company’s legal responsibilities as far as paying for or assisting in the relocation?

There are no state or federal requirements as far as what you must offer on relocation. 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 are being 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 policies would be applicable. You’ll see that a lot, where you have a collision of policies dealing with things like severance pay. Usually the merger agreement itself will 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 a short period of time their employment is terminated at the other end. Managers need 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 any written overcommitment in any transfer or relocation letters. So make sure there aren’t contractual commitments made to the employee. This is true even if your company has an at-will employment policy. We’re seeing areas where misrepresentation can legally negate even at-will employment policies. So the greatest caution to an employer on transfer is not to overcommit.

What if the company relocates an employee and that person quits soon after the move?

That’s a question we’ve been receiving a lot in the last nine months, as the economy has changed. If an employee quits after the company spends thousands on their relocation, can the employer recoup those expenses? More and more employers are developing or contemplating arrangements to address that issue. They deal with time period: If you stay in this position for at least a year, I’ll forgive the 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 or the recruitment of new employees. A year ago, employers weren’t thinking about this — they were just happy to fill positions. As the market is changing and employers view the cost of relocation as potential risk, they’ll address that now.

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!