Network Rail staff who live more than 75 minutes from work face losing their jobs unless they agree to move home.
The firm has told staff moving from its London headquarters to a new centre in Milton Keynes, which opens in June, that they must live locally or find new jobs. It said managers would be allowed to live 90 minutes from the centre.
The Transport Salaried Staffs Association said that around 850 staff who have agreed to move from the Euston HQ, mainly those living south of London in Kent, Sussex, Surrey and Hampshire, could be affected.
Employment lawyers suggested that the new rules may not be legal, saying it is not unusual for people to commute much longer distances and that firms and their staff have a "mutual duty of trust and confidence".
"I can't see on what grounds they could conceivably do it lawfully. For redundancies, Network Rail would have to show they have acted fairly and reasonably," said Kate Jackson, of Didlaw Solicitors. "If their behaviour could be seen in any way as unreasonable by the average person on the street, then a court is going to find that it is an unfair dismissal. Thousands commute to work over much longer distances so I cannot imagine anything which justifies Network Rail saying this to their staff."
Network Rail defended the policy, saying it believed it to be legal and that it was intended to "instill the right work-life balance" in staff at its new centre.
Manuel Cortes, the TSSA general secretary, said: "This is an unfair and arbitrary decision which we believe to be unlawful. This modern-day version of Beat the Clock to get to work is a complete nonsense.
"They are telling staff they cannot follow their jobs in the worst recession in 70 years. With unemployment heading towards three million, where else are they going to find work in these hard times?"
Mr Cortes has written to Network Rail, warning bosses that the union will take legal action to defend what it sees as its members' right to move to jobs in Milton Keynes without having to move home. He added: "We are hoping that Network Rail will start to see sense on this issue."
A Network Rail spokesman said the company thought the number likely to be affected was closer to 150 people but that anyone who refused to move within the zone would be "helped to find another job outside of Network Rail".
He added that managers were given more leeway on commuting times because the company wanted to "retain its better staff".