Self-Manage or Self-Destruct

Balancing Employee Freedom and Duty of Care in Relocation Policies

The enactment of the Tax Cuts and Jobs Act will have a profound impact on the relocation budgets of employers. Payment of Qualified Moving Expenses, which have provided a nontaxable benefit since 1986, will now cause a significant rise in relocation spend should employers choose to provide tax assistance for these expenses going forward.  Program administrators may find themselves under increased pressure to cut costs where they can.  Add this increased cost saving mentality to the continued migration of relocation plans towards plans primarily managed by employees, and employers might be heading towards unforeseen consequences.

The drivers of change to a self-managed program are pretty well known:

  • Recognizing today’s workforce might prefer more hands-on involvement with the coordination of their relocation affairs.
  • A desire to switch from what is perceived as a more costly established program to a less costly Lump Sum.
  • The desire to leave a “one size does not fit all” policy to a permissive policy in which the employee manages their funds for benefits most meaningful for them.

Often, the attempt to empower the employee with the freedom to choose their own benefits in their own fashion creates unknown and unforeseen consequences to the employer.  Have employers thought through the company exposure when an employee’s self-directed activities go wrong? Are they assured that the company is not being needlessly exposed to various areas of risk; exposure not only to a company’s duty of care axiom, but exposure to various workers compensation claims derived from employees carrying out work related directives?

Let’s look at three common areas in which a growing number employees either manage or take on the responsibility of the relocation benefit.

REAL ESTATE

According to Pew Research 49% of home seekers use the internet. For those individuals moving to a new city 53% used the internet and 60% report the internet is more heavily relied upon than other means.  But not all internet information is accurate and some information is misleading

Earlier this year Sue Carey, Vice President at Baird & Warner Real Estate and Kate Reisinger Director, Relocation & Client Development Coldwell Banker Residential Brokerage presented a case on the disruptors to the value add of the realtor, and shared interesting case studies that highlight problems encountered by transferees managing this aspect of their relocation.

One employee searching for detached 4-bedroom home in Oak Brook IL with his desired amenities, had the first four search results proposing homes ranging in value from $599,900 to $895,000. Without local insight, will the transferee understand why a similar home varies so greatly in price within a small geographical area?

Another, after reading that market conditions were very active and homes were in high demand, contracted for a home sight unseen.   He soon learned his new home was not in a desirable part of town.

A third found adequate information regarding neighborhoods and school ranking, but failed to understand that the schools selected were a minimum of 45 minutes away from the town they chose to live in.

We’ve all heard the expression that information is not the same thing as knowledge.  Education is not the same thing as wisdom. These cases exemplify that anything short of correctly assembling multiple pieces of information together towards a desired end, will usually result in disappointment.

Sue shared the result of an internet search using three popular listing aggregators and compared their estimated value of a particular property. The range between the three neared $100,000 in variance.  How can a person unfamiliar with the location of a home begin to know whether the home is within their price range or whether an offer should be tendered?

Schools, taxes, zoning laws, transfer fees, all present situations to potential buyers that may cause surprise if the buyer is not counseled appropriately.  Brokers, the boots on the ground acting as the transferee’s advocate, can ensure that these items will meet the transferee’s expectations. Brokers ensure one’s housing and school needs are met, and can match services for family members who are gifted artists, athletic phenomes, or in need of medical assistance or assisted elder care.

Not only are brokers a valuable resources for transferees, they protect the best interests of the employer sponsoring the move.  They explain and help the transferee follow the corporate policy and help maximize available benefits, even for the “free-to-use-as-you-wish” lump sum programs. Helping to buy smart will minimize problems down the road if the employee is transferred again.

Use of qualified brokers will also remove the lost revenue potential an employer expects to earn, when referral fees are relied upon to underwrite the cost of the program or pay for other benefits.  Transferees acting on their own are unlikely to have an understanding of their employer’s revenue expectations and fewer are likely to understand the actions that interfere with the payment of referral fees.   Employees who go rogue and make a “first contact” with a broker of their own choosing can very well prevent the employer from achieving its objective.

Best Practice: Keep decision making in the hands of your employees, but require the use of vetted brokers who can be an advocate for the transferee as well as being a partner supporting the employer’s efforts.

Self-Moving:

We’ve all done it.  Starting with college, then our first apartments, starter homes, and our second home.  Then it’s helping our kids move in and out of college and into THEIR first home – until we get too old and sore to want to do it ourselves anymore, and have reached the point in our lives when we prefer to pay someone to move us!

Willing to be kind to friends and family in our younger days and incur a couple easy to get achy muscles and joints in exchange for a six-pack of beer is one thing.  Doing it at the request of an employer asking you to relocate is another story.

According to the Bureau of Labor Statistics (BLS) muscle sprains, strains and tears accounted for half of all occupational injuries resulting in workers missing days on the job.  You might not lift things for a living, but there are many ways to injure yourself and your property.  According to the BLS survey, back injuries were the most common; a result of improper lifting techniques or lifting items too heavy for one’s back to support. Consider how many repetitive lifts are done in the act of moving boxes from a dwelling into a truck or trailer and then positioning them within.

It is easy to lose control when items you are lifting are bigger or heavier than you. Large objects may fall, tip or swing; not only possibly causing injury but easily causing damage to the piece or the dwelling. Large furniture and appliances that damage doors, floors and walls change your simple move into a costly venture.  Similarly, damage can be made outside and inside a vehicle while loading and unloading. Keep in mind that many cars are not designed to haul very heavy or unsecured items.

Loading a truck is not a simple matter.  Most often, either it is loaded randomly or in a fashion that simply makes everything fit. Professional movers understand proper weight distribution and load trucks so the weight of a shipment is distributed evenly across the axles supporting the trailer. This helps ensure minimal stress on the truck itself and its tires.  Cargo shift is minimized with placement of pallets and shrink wrapped belongings, and with proper tie down configurations within the truck. Unsecured or poorly secured belongs within a rental truck can shift and result in damage.

Loading a trailer can be worse.  Balance and weight placement is key in smooth trailer operation according to attorney Michael Grossman in his Texas Injury Law Blog. His blog explains that a trailer’s weakness is not an inherent design flaw, but rather an aspect of physics.  The central pivot point is the tow hitch. Turning the car left makes the balanced trailer turn right, but it rapidly corrects when the car pulling the trailer straightens.  But if the load shifts and becomes unbalanced, course correction of the trailer is compromised.  A tight turn, excessive speed or sudden lane changes only intensify the problems of an unbalanced trailer, and if such shift continues the problem intensifies, and in an instant an accident can easily occur.

U-Haul’s Moving Tips note that 60% of cargo weight should be in the front of the trailer and 40% towards the rear. Transferees in a hurry to “get this over with” or just get everything to fit, may not follow that advice.

The transferee that ends up in an accident that causes injury or property damage does not get off the hook merely because he or she lacked any “intent” to cause damage.  According to Grossman, intent and premeditation are concerns in criminal prosecution, but civil litigation primarily deals with results.  Negligence will likely be asserted by a plaintiff for the transferee failing to exercise a proper “standard of care” when performing the activity.

Best Practice: Employers need to assess the amount of risk they may be exposed to from an injured party extending their claim against the transferee to the transferee’s employer.  Furthermore, employers must consider the potential for employee claims as well – whether in the form of workers compensation or litigation from the employee or injured party asserting that the company’s culture of directing a self-managed move gave rise to greater risk of harm and injury to all involved.

Shared Housing:

The popularity of rented homes directly from owners is well known. Airbnb, HomeAway, VRBO and FlipKey have contributed to an explosive growth in the home-sharing marketplace. According to Consumer Reports these sites have created a $100 Billion economy with millions of people listing their dwellings (or rooms within) to generate income.

Consumer Reports shares that in 2009 when Airbnb was founded, travelers booked 21,000 stays through its website. In 7 years this figure has grown to 80 million bookings in 2016!  A 3,800% increase.  Recent estimates places Airbnb’s valuation ahead of Hilton and roughly on par with Marriott’s at $30 Billion.

All these places have their place.  Demand for authentic experiences and unique accommodations contribute to the popularity and growth of these services.  According to Consumer Reports 70% of users do so to save money over competing lodging options and 92% say they are likely to do it again, according to the survey.

The important thing to keep in mind, however, is that these sites are like more akin to e-Bay and on-line dating sites than they are to hotel websites.  Their business is connecting people wanting something with someone having something to give.  Just like Uber and Lyft, they are actually technology companies. In this case, the technology platform connects people who have spare accommodations with people looking for a place to stay. The sites do not provide accommodations, nor do they maintain accommodations.  They do not control ownership, management, or safety of the accommodations.  And just like items on e-Bay or profiles on dating sites, the photos you see are not always what you end up with.  Photos may not give you the actual picture of what you have in store. But unlike a returnable item or a first date you can walk away from, neither the booking sites nor the hosts will refund your money if the property doesn’t measure up to your expectation or the fantasy you created in your mind.

This is an industry built on trust. Trust that the host is the property owner with a right to rent the dwelling, that doing so doesn’t limit or negate the insurance the host carries on the property, or violates local zoning laws or HOA restrictions against rentals, or violates local transient laws enacted by the village or town.  Trust that the pictures and reviews are legit, trust that you and your employees are in a safe location, and in a safe dwelling.

Horror stories are easy to find about former guests who maintain key access to an occupied dwelling, unlivable conditions of properties, unresponsive hosts and lack of ability or perhaps willingness of the lodging sites to be an advocate for the renter.

Best Practices: Until some kind of independent certification system exists that verifies ownership, proper insurance, the legal right to rent out spaces and confirmation of property condition, etc.,  employers should consider developing their own “approved lodging” list by vetting hosts in the locations most often visited. Discuss with your legal team ways employee safety can be improved with reasonable guidelines as to how employees should use shared housing sites if they opt for such an option.

Defining Duty of Care:

Employers have a duty of care to their employees, which mean they should take all steps which are reasonable to ensure the health, safety and employee well-being. Demonstrating such a concern should not be seen merely as a legal duty – but as a sound business case as well.  It is key to building trust within the mobile workforce, improve job satisfaction and retention, and boost productivity.

Exposing transferees to risks as highlighted in these common areas of self-managed relocation may fall short of company legal and ethical obligations.

Legally employers must abide by relevant health & safety and employment law, as well as common law duty of care.  Employers also shoulder an obligation to not cause, nor fail to prevent, physical injury and must fulfill their responsibilities with regard to personal injury and negligence claims.

Best Practices:

Employers need to view the risks associated within their relocation program – whether use of the aforementioned options are required by policy or merely so common that they are viewed as a “per se” obligation – and see if the cost savings and “employee freedom of choice” balances with their corporate duty to keep employees safe.

The relocation landscape will continue to evolve and change to address financial concerns and the needs of the next workforce.  Freedom of choice always has a cost.  Prudence dictates that the employer ensure the program that allows for freedom of choice by the employee does not relinquish the legal protections and employee safety established through a program with structure and control.  Such analysis will support self-manage and hopefully avoid self-destruct.

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