If you are considering relocating your business, you will need to consider the possibility of redundancies, both in terms of your costings for the move and also in terms of the process you will need to use. It is clear that if a business closes down altogether, the staff will be redundant, but if the jobs are all still available somewhere else, when would redundancy be applicable?
Is there a redundancy situation?
One of the definitions of redundancy is where an employer has ceased to carry out business in the location where the employee worked. Therefore, even if you immediately start operating at a different location, and even if your employees’ jobs are still available exactly as they were except at a different location, it is still technically a redundancy situation (unless you invoke a valid mobility clause to effect a relocation in which case a dismissal for refusal to relocate could instead be a misconduct dismissal rather than redundancy).
What was the employee’s place of work?
In order to establish whether or not an employee is entitled to a redundancy payment in the event of a relocation, it needs to be clear that their normal workplace was at the location being closed down. Normally it’s easy to identify this, but if there is a mobility clause in the employee’s contract you may feel that redundancy doesn’t apply as you have the right to vary their workplace. In fact, the legal position is that in the event of a dispute, a tribunal would look at where the employee’s normal place of work actually was, not where it could have been.
So even if your staff have a valid mobility clause written into their contract, it could still be a redundancy situation if employees may be dismissed as the result of a relocation. Exercising the mobility clause with a view to avoiding dismissals could bypass a redundancy situation but you would need to be very clear that you were invoking the mobility clause to effect the move.
Suitable alternative employment
The other factor in establishing whether an employee is entitled to a redundancy payment is whether or not he or she has unreasonably refused an offer of suitable alternative employment. But does the same job at a different location constitute a ‘suitable alternative’?
If you are relocating only a very short distance, then even if you don’t have a mobility clause in your employees’ contracts, a tribunal would probably consider a very short distance to be ‘suitable’. Of course if it were literally round the corner it is unlikely many employees would refuse to move anyway. But what if they did?
We do get asked by clients considering a business move how many miles they can relocate without having to pay redundancy to team members who don’t want to transfer. Understandably, business owners may want to take that into consideration when choosing new premises.
Unfortunately there is no specific distance set, or specific amount of additional travel time beyond which redundancy will apply. Instead it will depend on a variety of factors specific to the circumstances of the business and of the employees concerned.
Taking personal circumstances into account
One of the reasons there is no set mileage or travel time limit on relocation to avoid redundancy is that an employer is required to take employees’ personal circumstances into account when determining whether to pay redundancy.
For example, if you have a young, single, child-free member of staff with no particular family ties, no transport restrictions or relevant disabilities and easy access to a car who refuses to relocate to a new premises which would involve an additional 15 minutes’ drive, that might not be a reasonable refusal and you could therefore consider refusing redundancy pay.
However, if you are making the same relocation and a single mother with three children at school and childcare refuses to move as the new location is in the opposite direction and she would not be able to make the necessary arrangements, or a disabled employee who cannot drive refuses to move because the new premises are at a site where there are no good public transport links, those refusals might be reasonable and the employees in questions should therefore receive redundancy pay.
Just as with any redundancy situation, you need to consult with your team about the relocation. Even before you’ve definitely decided to move, or identified a suitable new premises, starting consultation on an informal basis is a good idea.
Depending on how far you are moving and on other factors, you may find that collective consultation rules apply. Small businesses usually don’t need to worry about these requirements, but when 20 or more people might be made redundant (which could easily be the case if you’re relocating), collective consultation requirements are triggered.
Collective consultation would require you to consult with a representative of your employees (either a union rep or a workplace representative), and for consultation to start at least 30 days before dismissal.
If you’re considering a business move and want to know whether redundancy will apply and how to approach it, do get in touch.