The relocation of corporate headquarters can be upsetting for employees. When planning a move, employers should highlight what’s in it for workers, while considering if remote work is an option for those who won’t relocate and revising employee handbooks.
Why Do Companies Move?
The main reason companies choose to relocate to another state is because the new home is employer-friendly with respect to its employment laws and has a pro-business regulatory environment, said Cristina Portela Solomon, an attorney with Foley & Lardner in Houston.
For example, Texas is considered an employer-friendly state, she said, noting it has a low tax burden—0 percent corporate income tax, 0 percent personal income tax and 8.25 percent combined sales tax rate—a healthy economy, a low cost of living and a skilled workforce.
These facts might be framed as beneficial for employees, particularly the absence of any personal income tax.
“Locations that have a strong workforce due to a robust post-secondary education system will meet the needs of a relocating employer,” said Jazmyn Barrow, an attorney with Ogletree Deakins in Cleveland. The availability of a talented, diverse workforce is another key consideration for employers that are relocating headquarters, she said. Both reasons could be viewed favorably by workers, who might like proximity to a strong university system and a diverse work environment.
Human capital may be a driving factor behind a move, noted Richard Greenberg, Susan Groff and Tasos Paindiris, attorneys with Jackson Lewis in New York City, Los Angeles and Orlando, Fla., respectively, in a joint e-mail. For example, if the employer needs a larger pool of employees in a certain industry or with certain expertise, relocating may give the company better access to such candidates. Or, as a company’s business has evolved, its main operations may migrate, and the company may want its headquarters closer to where its primary work is being performed, they explained.
Some reasons, however, will appear to many employees as mainly in the employer’s interest, unless the justifications are given some context.
Solomon said there are fewer state employment laws in some states, such as Texas, and less restrictive requirements than other states that have laws more generous than federal law. For example, other states make noncompete agreements either unenforceable or impose stringent requirements for the agreements to be enforceable. Noncompetes are enforceable in Texas if confidential information or an ownership interest is provided to the employee.
Texas also has no additional state wage laws and follows federal wage law. So, the minimum wage is lower than in most other states and there are no additional overtime requirements in the state.
Solomon said companies that have relocated to Texas “are experiencing fewer employment lawsuits and a simpler and less expensive climate to operate in from an HR perspective.”
These pro-business reasons may result in a more profitable business and keep more workers employed. Some workers, however, may prefer stricter standards for companies.
Relocation Considerations
As companies relocate, remote work often is important for employee retention.
For example, if a company moves it can encourage retention of high-performing employees by allowing them to work remotely. “The relocating employer gets the best of both worlds,” Solomon said. “They retain key employees and still reap many of the benefits of being headquartered in a state with a more favorable legal and business climate, including the availability of a broader talent pool.”
Not all companies may be able to offer remote work. If a company was planning a relocation to reduce its footprint, the business may not want to offer remote work, Greenberg, Groff and Paindiris explained.
Handbook Revisions
Consider how a relocation may necessitate revisions to policies and procedures, particularly those relating to leaves and wage and hour issues. “If updating benefits and policies, determine if there are particular notice requirements for those changes,” the Jackson Lewis attorneys said.
Provide clear communications to employees about the relocation, even to those who may not be relocating along with the headquarters, they added. Offer reassurance of the path going forward to ensure retention, including, they recommended, the potential for remote work if possible.
“The most obvious adjustments are likely to be around any state-mandated benefits, such as sick pay,” said Erika Collins, an attorney with Faegre Drinker in New York City. “Employers should review their handbooks to ensure compliance with local laws where the new headquarters are located.”
If the employer will operate solely in the state of the new corporate headquarters, the handbook will need a complete overhaul, Solomon said. Alternatively, if the state where the new corporate headquarters is located is an additional state the employer will be operating from, state-specific addendums should be included to comply with state and local laws, she noted.
Some companies take a more gradual approach. Greenberg, Groff and Paindiris said it is uncommon for a company to make a wholesale change to all policies and procedures due to a relocation. In addition to legal compliance, there are employee morale and retention considerations, so companies typically keep as many of their prior policies as possible, they said, noting that some policies may change due to state benefits, such as paid family leave benefits offered by states. However, over time, if the company leaves a particular state, it is likely to discontinue certain policies and procedures required in that state, they added.
“Employees need to have a thorough understanding of the reason for the relocations and the benefits to residing in the new state,” Solomon said. Employers should typically offer relocation agreements that address such things as moving expenses.
Companies that are moving their corporate headquarters will want to consult with employment counsel early in the process, Solomon said. “This will ensure that relocation agreements and policies are developed for employees they wish to retain,” she noted.
The separation from employment of employees who are not being offered relocation or who do not wish to relocate should be handled in a lawful manner, Solomon said.
