When Set Daylight-Saving Time Automatically is checked in the Date & Time control panel, the time is actually adjusted forward or backward by changing the Greenwich Mean Time (GMT) offset by 1.
When a location is created using the Time Zone setting, the Location Manager remembers the GMT offset for the new location.
The Location Manager is not Daylight Saving Time-savvy and is unaware when the saved GMT offset for a location has been affected by a Date & Time control panel time shift. The Location Manager will change back to the GMT offset known before a Daylight Saving Time change occurred, thereby throwing the clock off by an hour.
After a Daylight Saving Time change, the Location Manager will also believe that the location needs updating, because it notices the different GMT offset.
Workaround
When a Daylight Saving Time switch occurs, you must edit each location with a Time Zone setting and apply a new GMT offset for each location.