a managed client should only be able to change location (thus change the policys relating to the location settings) based on what the Administrator has set up in the "Manage Locations" section of the SEPM.
If you go to 'open the EndPoint Client Options on a PC, go to Change Settings, Configure Setting on Client Management Options, General Tab' and click the "Help" button, there will be a more descriptive explanation of the 'Current Location' dropdown, including it's limitations.
I would like to follow this up by saying that if you have multiple locations whose critieria overlap, it is possible to have multiple locations that the client is able to fit in. When that's the case, a client should be able to switch locations in this manner. The best resolution to the original question is to ensure that your location switching criteria only alows for the client to fit into one location at a time.