This issue was recently considered by the Employment Appeal Tribunal (“EAT”) in the case of Kellogg Brown & Root (UK) Ltd v Fitton.
If an employer closes its office and re-locates somewhere else, this comes under the definition of ‘redundancy’ as set out in the Employment Rights Act 1996. However, it is not uncommon for the employer to choose to rely upon a mobility clause (if contained) within the contract of employment to require the employees to re-locate. This might be done in order to avoid making redundancy payments, or where the employer wants to keep its employees, and transfer them to the new location.
Sometimes the employees will object where, for example, the relocation involves a significantly longer commute from home.
The courts and tribunals have established that an employer is lawfully entitled to invoke an express contractual mobility clause and avoid any liability for a statutory redundancy payment in a situation where there is a closure of part of the business. In this type of situation if the employee refuses to relocate and the employee is dismissed then the employer can rely on that refusal to obey a lawful instruction as misconduct. It is then a matter for any tribunal to consider the question of fairness, and it would look at whether the employer had acted reasonably in giving the instruction and whether the employee had acted reasonably in refusing to comply with that instruction.
In this case, the employer closed its Greenford site and required its employees to re-locate to Leatherhead. The mobility clause in their employment contracts provided that: ”The location of your employment is … but 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. You agree to comply with this requirement unless exceptional circumstances prevail.”
Kellogg’s disciplinary procedure gave failure to carry out reasonable instructions as an example of misconduct.
Both Mr Fitton and Mr Ewer were instructed to transfer to Leatherhead. In doing so they faced greatly increased travelling time as a result of the office closure. They both objected to the relocation and stated that the mobility clause was unenforceable. They claimed that their roles were redundant and that they should receive their redundancy payments. Kellogg responded that if they continued to refuse their absence would be treated as unauthorised and investigated under the disciplinary process. Both employees were summarily dismissed for misconduct. Claims were issued in respect of unfair dismissal and statutory redundancy payments.
The employment tribunal decided that the mobility clause was very widely drafted and lacked certainty. The instruction to work in Leatherhead had been unreasonable given the greatly increased travelling time. It stated that the reason for the dismissals was redundancy and not misconduct and therefore the disciplinary process was procedurally flawed. Accordingly, the dismissals were unfair.
On appeal the EAT decided that the reason for their dismissals had been their alleged misconduct and not redundancy. However, it decided that the dismissals on the grounds of misconduct had been unfair as the instruction to relocate was neither legitimate or reasonable. It considered that the employees’ reasons for refusing to relocate however, were reasonable.
Whilst this decision does not alter the law, it serves as a reminder to employers to properly consider at the outset whether it should treat an office closure as a redundancy, or, if relevant, consider relying on a contractual mobility clause. Whilst using a mobility clause may enable an employer to avoid dismissing employees for redundancy, the terms of the mobility clause and the manner in which the employer operates the clause will themselves be subject to scrutiny.
If you would like assistance with drafting mobility clauses, or if you would like hep in managing a relocation process, please contact a member of our Employment team.