Big US companies are mandating remote employees to either relocate near an office or resign. Here’s why that’s a legally risky proposition for any company with an international workforce.
Zain Ali | 12 August 2024
Disney and Grindr: two household names one wouldn’t normally associate, united by the ultimatum they each gave their employees: relocate or resign.
Let me explain. Some companies like Walmart and Amazon had made the decision to downsize their old offices and move their employees to new hubs, often far away. For other companies, their employees had been in-office until the pandemic struck, when work-from-home became the ‘new normal’. In some cases, the workers were hired on remote-first contracts during the government-mandated lockdowns.
It sounds drastic, but many companies have done this for, often, sound reasons. Many workers — particularly since the pandemic — have felt disconnected from their employers. But is cajoling their workforce back to the office a good idea from a legal standpoint?
After all, employees haven’t complied so readily. Amazon’s mandate triggered workers to storm out of their office in protest, some resigning en masse as a result. And here in the UK, many formerly remote employees are taking their former bosses to court.
This shouldn’t come as a surprise — for three reasons.
1. Lay-off fears
First, some claim these moves are part of a lay-off strategy. This is easy to understand in the case of THG, who twinned an unpopular relocation mandate with a lay-off of 171 employees.
2. Poor execution
Second, the ultimatums have been handled sloppily. Patagonia gave their employees three days to make the decision, while Disney reneged on its mandate two years after imposing it, despite one employee even selling their childhood home. Workers are understandably furious.
3. Legal vulnerabilities
Third, a company making that decision treads on shaky legal ground. There are a whole host of legal, taxation and HR issues to consider, which become all the more complex for a company with a globally-dispersed workforce.
During the pandemic, many companies hired staff to work remotely from overseas. Similarly, many domestically-based employees used their newfound flexibility to fulfil dreams of living abroad. Both these classes of workers would be materially impacted by any decision to force them back to the office. They wouldn’t only have a valid grievance; they may very well have legitimate routes to take legal action against their employer.
What are the legal implications?
There are a few legal details that make relocation mandates a complicated prospect for companies, whether or not they’ve hired from abroad.
The mobility clause
The buck stops with the contract. If the contract stipulates that the role is remote, you cannot force an employee to relocate without seriously breaching the terms.
Consider, too, the contract’s ‘mobility clause’, which gives employers the right to choose where their employees work. If the employee’s contract has no ‘mobility clause’, they’re perfectly within their rights to reject the mandate — and will not breach the contract in doing so. But you will breach the contract if you make them redundant as a result.
Of course, you’re free to do so — but if the employee has worked for the company for more than two years, making them redundant could be deemed ‘unfair dismissal’ in the UK, or ‘constructive dismissal’ in the US. In other words, grounds for legal action.
Make no mistake: a mobility clause doesn’t write employers a blank cheque. Here in the UK, mobility clauses are far from vague, and defined within a strict geographical radius — the Greater London area, for example. If the mobility clause is vague, it will be considered unreasonable.
What is ‘unreasonable’?
The word ‘unreasonable’ is the crux of the ‘relocate or resign’ ultimatum.
Asking an employee to relocate anywhere — whether it’s four miles away or on the other side of the world — must be deemed a ‘reasonable’ request. I know — it sounds a bit airy-fairy, but most governments provide guidelines on ways to make your request as reasonable as possible.
Here’s the rub: the greater the distance of the relocation, the more potentially ‘unreasonable’ the request is, which makes matters extremely complicated for companies with a globally-dispersed workforce.
First, the decision to relocate must itself be reasonable — like Channel 4’s decision to relocate to Leeds owing to the exhorbitant London rental market. In other words, the decision can’t be arbitrary. It can also be made to enhance productivity or make employees feel more connected.
So, what would be ‘unreasonable’? As I’ve already said, enforcing cross-border relocation poses a whole host of risks.
The notice period could be too small — this would give your employees carte blanche to sue you, because the greater the move, the longer the required notice period. Maybe no compensation is offered to cover moving expenses. Perhaps the mandate imperils the employee’s right to reside in their country of residence. All of these things would be considered ‘unreasonable’.
It’s more complicated with an international workforce because you’re dealing with more than one legal system. A worker may be a US-native, working for a US company under a US-sanctioned contract, but they’ll be protected by the laws of their resident nation.
Take the Netherlands. If a British company wishes to relocate a British employee residing in the Netherlands to London, they must face the fact that the Dutch legal system considers any relocation request ‘unreasonable’ if it would lead to a decrease in the employee’s quality of life. In this case, it wouldn’t be unreasonable if the employer offered higher wages to negate the effects of London’s expensive rental market.
In short, the British employee — even with a mobility clause in their British contract — could reject the mandate as unreasonable, all without breaching the contract.
Let’s say the employee in question has been on the payroll for fewer than two years—what then?
Employers still don’t have carte blanche. Workers can still bring legal action against them — for discrimination.
Avoiding discrimination
If the relocation unduly discriminates against someone — whether they’re immunocompromised, a working parent, a disabled person, or a carer — they can bring legal action against you.
A British court ruled that a contract manager was unfairly dismissed for ignoring the return-to-work mandate owing to his need to shield his immunocompromised son. The same happened in the US, when an immunocompromised US citizen sued his former employer for ‘constructive dismissal’, as he had refused to return to work.
Working parents, under US and UK law can sue for discrimination if the relocation would unreasonably uproot their life: if their spouse had to change their job, for example; their child move to a new school, or if they had to move house.
And while your employee may meet the UK government’s new threshold for the skilled worker visa (£38,700), their spouse may not — and this could be seen as discriminatory. Hearts could be broken. Families torn apart.
But — and this a big ‘but’ — there are ways to mitigate such disasters.
An employer’s request will not be deemed unreasonable if they can prove they offered to make the transition as smooth as possible.
They could provide a generous relocation package, including compensation for travel expenses and moving costs. Provide temporary housing or deal with estate agents on their behalf. Offer childcare support to working mothers. The list goes on.
What are the tax implications?
183 days — that’s the rule. An individual becomes a tax resident in a country after residing there for more than 183 days.
What happens, then, if you suddenly recall them? Double-taxation.
Take South Africa. An individual ceases to be a tax resident of that country after being physically gone for more than 330 days. In other words, a UK or US-based business will end up paying tax twice for a given period. Thankfully, both the US and UK have double taxation agreements with South Africa, enabling you to offset the extra taxes in your next bill.
We get into murkier territory when it comes to social security contributions. After all, there are fewer double social security treaties than double taxation treaties. For instance, the UK doesn’t have a double social security treaty with Albania, an increasingly popular hub for digital nomads. Without practising extra due diligence, you could end up paying social security contributions for both countries.
In both cases, the authorities of the employee’s former country of residence must be notified of their departure.
What are the HR implications?
Asking employees to relocate doesn’t always have to be so risky. One study found that 70% of new employees want an overseas job or assignment. Take that with a pinch of salt. The study didn’t mention whether those surveyed wanted to be a remote-first digital nomad — which many do.
The age of your employees is an important factor to consider. Millennials are more likely to want to work remotely, or under a hybrid model — they may be less inclined to relocate. Similarly, Gen-Xers might need more incentive to relocate, as they’re more likely to have children.
Different countries have different standards of living — and this must be addressed. A UK-based fintech, for instance, with a branch in Moldova, can pay their employees less than their UK counterparts because the average gross monthly salary in Moldova is £1,183. Whereas, in the UK, it’s £2,886. The relocation change must reflect these differences, wherever the new hub is based.
What are a company’s obligations?
Under UK employment law, a company doesn’t need to provide compensation for a cross-border relocation unless it’s stipulated in their contract — but that doesn’t mean non-compensation is an advisable HR strategy.
Put it this way. If the repercussions of the mobility clause causes unreasonable discrimination, the clause itself is invalid.
Take the USA. If a global remote worker is forced to choose between relocation and resignation — even if their contract has a mobility clause — they can still claim discrimination if you don’t provide “reasonable accommodation” for relocation, according to the ADA.
Clearly, relocation is a costly business. If we go by recent metrics, relocation compensation costs some companies up to $97,000 per employee. It’s also riddled with bureaucracy, particularly in 2024 as Western nations adopt increasingly harder stances on immigration.
Your company will have to sponsor their work visa, which requires a licence to do so. Then you must ensure the employee’s pay meets the income threshold. In the UK, for instance, this was recently raised to £38,700 — which might be fine for the employee, but it could make it difficult for them to relocate their spouse. Most work visas allow for dependents — with some exceptions, like care workers — as long as they can feasibly support them.
Clear communication is important, from the consultation process to the move itself. Showing empathy will also make a huge difference, whether it’s helping the employee with networking opportunities, navigating the legal system, or even finding temporary accommodation. After all, you’re asking someone to potentially wave goodbye to their friends and family.
