The Impact of the Employer’s Relocation on the Labor Contract

Due to the business need, Company A plans to relocate from the downtown to the suburbs, for which it has prepared some resettlement measures, such as the shuttle bus and etc.. However, some employees still refuse to be relocated with the company, they want to revoke the labor contract and require the financial compensation. Then how can such employers deal with the above issue?

According to “Labor Contract Law” Article 40 and Article 46, which stipulate that the objective conditions taken as the basis for conclusion of the contract have greatly changed, so that the original labor contract cannot be performed and, after consultation between the employer and the employee, no agreement is reached on modification of the contents of the labor contract, the employer shall be entitled to revoke the labor contract and pay the financial compensation. Here the question comes, whether the relocation belongs to the objective conditions stipulated in Article 40?

In view that the current laws, regulations and judicial interpretations have not listed the relocation in the objective conditions stipulated in Article 40, we have to find some basic criteria on solving such issue based on the numerous judgments of the judicial authorities.
Firstly, where an employer relocates to another city, normally, this will be deemed as the objective conditions stipulated in Article 40, if the employee refuses to be relocated, the employer shall pay the financial compensation. The reason is that different cities may apply different local labor regulations, and the benefit for the employees might be different, such as the different social insurance base, minimum wage, and etc..

Secondly, where an employer relocates within the same city, then different cities may have different results. Take Shenzhen for example, according to “the Summary of the Symposium on Issues Concerning on the Applicable Laws for the Trail of Labor Disputes by the Shenzhen Intermediate People’s Court”, Article 5, such relocation shall not be deemed as the objective conditions stipulated in Article 40, if an employee wants to revoke the labor contract, he/she cannot obtain the financial compensation. But for Shanghai, the distance between the old venue and the new venue, the reasonable resettlement measures might be taken into consideration when dealing with such cases. Normally, the relocation within the downtown, or between the downtown and the suburbs with reasonable resettlement measures, shall not be deemed as the objective conditions stipulated in Article 40. For example, in the judgment, (2010) Hu Yi Zhong Min San (Min) Zhong Zi No. 823, the court determines that the employer has prepared the resettlement measures, so such relocation shall not be deemed as the objective conditions stipulated in Article 40.
Therefore, in practice, for the relocation within the same city, we recommend the employers should pay attention to the following aspects:
Firstly, the local judicial practice rules shall be researched in advance.

Secondly, the resettlement measures shall be prepared in advance. In addition, such measures shall be discussed and confirmed through the “democratic process”. The employer shall make such measures public or communicate the same with the employees, and save the relevant evidence (e.g. the documents for collecting the employees’ suggestions and etc.). The reasonable measures include the shuttle bus, and the more convenient working time, and etc..

Thirdly, the employers shall actively communicate with, report and file the relevant resettlement measures to the competent labor authorities.
Furthermore, in order to reduce the risk for the disputes on relocation for the short distance, it would be better for the employer to stipulate the “working venue” more generally, such as set the city instead of the specific address.