Case update (2): Redundancy – reliance on mobility clauses

Summary: Can a contractual mobility clause enable an employer to avoid dismissing employees for redundancy?

Yes, but only if the terms of the mobility clause and the manner in which the employer operates the clause are reasonable. The EAT’s decision in Kellogg Brown & Root (UK) Ltd v Fitton, available here, is a useful illustration of this.

Background:  In circumstances where an employer faces a redundancy situation because it is closing a particular workplace, it may be able to avoid making employees redundant if it can rely on a contractual mobility clause and instruct the employee to relocate to another of the employer’s operations.  If an employer proposes to limit redundancies in this way it needs to ensure that it takes this approach from the start.  If the employer instead announces a redundancy exercise and offers the new location as suitable alternative employment, if that offer is refused the employer must then either find alternative employment or dismiss the employee for reasons of redundancy  i.e. employers cannot back-track at this point and seek to invoke a mobility clause.

Facts: The employer was closing down the workplace in which the employees, Mr Fitton and Mr Ewer, worked. They were both very long serving employees with mobility clauses in their contracts that stated: “…the company may require you to work at a different location including any new office location of the company either in the UK or overseas either on a temporary or permanent basis…”  In addition, the employer’s Disciplinary Procedure gave failure to carry out reasonable instructions as an example of misconduct.

The employer, in reliance on this clause, instructed both employees that they were to relocate to its second site. This would give rise to an additional 20 to 30 hours of commuting time each week for the employees.  Mr Fitton lived close to the closing workplace and did not have a car (although he was able to drive).  Mr Ewer also lived close to the workplace, had done so for his whole life and was only a year away from retirement and did not want to spend the last year at work subject to the stress of a considerably extended commute.

The employees were given two months’ notice of the relocation and the employer proposed various measures to assist the employees with the relocation.  These included a contribution towards additional travel costs for a six month period and a reduction in core working hours to allow employees with longer journeys to finish earlier, to assist with the M25 traffic.

Mr Fitton and Mr Ewer both refused to relocate.  They both argued that the mobility clause was unenforceable and that they were redundant. They were both summarily dismissed for misconduct for refusing to comply with a reasonable management instruction to relocate.

The employees brought Tribunal claims for unfair dismissal.  The Tribunal held that the dismissals were unfair and were by reason of redundancy. The employer appealed to the EAT which upheld the Tribunal’s decision that the dismissals were unfair.  However, the EAT held that in fact the employees had been unfairly dismissed by reason of misconduct.  This was because the employer had chosen to rely on the mobility clause and not pursued redundancy.  For such a misconduct dismissal to be fair: (i) the instruction to relocate had to be lawful (i.e. was the employer entitled to rely on the mobility clause?); (ii) the employer had to have acted reasonably in giving that instruction; and (iii) the employee had to have acted unreasonably in refusing to comply with the relocation instruction.

The EAT found that (i) the instruction to relocate was not lawful as the mobility clause was drafted too widely in that it suggested that the employee was agreeing to work anywhere in the UK or overseas (ii) the instruction to relocate was unreasonable in light of the considerably extended commute, the fact Mr Fitton did not have a car and that Mr Ewer had worked close to his home town for 25 years and was due to retire a year later and (iii) it was reasonable for both employees to refuse to comply with the relocation instruction.

Implications: This decision does not alter the law but usefully illustrates the confusion that can arise when an employer seeks to exercise a contractual mobility clause against the backdrop of a redundancy situation. Using a mobility clause may enable an employer to avoid dismissing employees for redundancy. However, the terms of the mobility clause and the manner in which the employer operates the clause may themselves be subject to scrutiny.  In particular the following points should be noted:

• when embarking upon a redundancy exercise, consideration should be given to whether a mobility clause can be relied upon to avoid making employees redundant;
• mobility clauses must not be too widely drafted as they risk being void for lack of certainty;
• just because there is a mobility clause within the contract will not mean that it is automatically fair to dismiss an employee who refuses to comply with an instruction to relocate; and
• if the mobility clause can be relied upon then an employer has to act reasonably when invoking that clause. For example, providing sufficiently long notice of the relocation and possibly providing some sort of transitional financial assistance.