Mobility clauses in employment contracts: Reasonableness is key

by Dentons
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The Employment Appeal Tribunal (EAT), in the case of Kellogg Brown & Root (UK) Ltd. v (1) Fitton and (2) Ewer, examined in detail reliance by an employer on a “mobility clause” in an employment contract in circumstances where two employees were instructed to move to another site, after the closure of the site at which they worked.

What is a mobility clause?

All employees are entitled to receive a written statement of their terms and conditions of employment.  One of the terms that an employer must provide is the employee's normal place of work. However, in order to maintain a degree of flexibility to allow for circumstances whereby it may be necessary to require employees to move from one location to another, relocation or mobility clauses are typically incorporated into employment contracts. Generally, these clauses specify that the employer reserves the right to change the place of work and that an employee may be required to work from any office or location of the employer, as the need arises.

The facts

Mr Fitton and Mr Ewer were employed by Kellogg Brown & Root (UK) Ltd (Kellogg) and worked at its site in Greenford, Middlesex. Kellogg decided to close this site and instructed Mr Fitton and Mr Ewer to transfer to its site in Leatherhead, Surrey, in accordance with the mobility clause in their contracts of employment. Both Mr Fitton and Mr Ewer refused to do so on the basis that such a change in location would significantly increase their commute times by some 20 to 30 hours per week.

Kellogg believed that it could rely on the mobility clause because it was a reasonable instruction to require the employees to work at the new location. Kellogg considered that the availability of work at the new site meant that redundancy was not available and that the refusal to work at the new site was a breach of contract.

Both Mr Fitton and Mr Ewer were invited to disciplinary hearings for alleged unacceptable conduct for refusing to relocate and were summarily dismissed. Their appeals were unsuccessful and they both issued proceedings for unfair dismissal and a statutory redundancy payment.

The decision

The  Employment Tribunal (ET) held that the dismissals were unfair and were by reason of redundancy. Kellogg appealed to the EAT, which upheld the ET's decision that the dismissals were unfair but assessed that the employees had been unfairly dismissed by reason of misconduct, as opposed to redundancy. This was because Kellogg had chosen to rely on the mobility clause and not pursued a redundancy route. For such a misconduct dismissal to be fair, the EAT considered that:

  1. the instruction to relocate had to be lawful (i.e. was Kellogg  entitled to rely on the mobility clause?);
  2. Kellogg had to have acted reasonably in giving that instruction; and
  3. the employees had to have acted unreasonably in refusing to comply with the relocation instruction.

The EAT found that it was indeed unfair because:

  1. 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";
  2. the instruction to relocate was unreasonable in light of the considerably extended commute (i.e. an additional 20 to 30 hours per week); and
  3. it was reasonable for both employees to refuse to comply with the relocation instruction.

What is the practical impact of this for employers?

Mobility clauses or the lack thereof are routinely examined by Employment Tribunals in deciding claims brought for unfair dismissal and redundancy payments. The key question to be decided is whether it is reasonable for an employer to rely on such a clause, or conversely whether it is reasonable for an employee to refuse the relocation or the alternative employment on offer. While this decision does not alter the law, it usefully illustrates that reasonableness is key. If the mobility clause can in principle be relied upon, then an employer still has to act reasonably when invoking that clause and mobility clauses cannot be exercised in an unfettered fashion. Regardless of whether or not a contract contains a mobility clause, it is important that employees are consulted on any proposals in terms of relocation. Providing sufficiently long notice of the relocation and possibly providing some sort of transitional financial assistance may also be helpful. Proximity of the new workplace is also a relevant factor. It will be difficult to argue that a request to transfer is unreasonable when the new work location is in close proximity to the old.

Note that the test for reasonableness is subjective and not objective. Therefore, the Tribunal will consider the employee's subjective view as opposed to what the employer deemed to be reasonable.

This case also 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;
  • in particular, mobility clauses must not be too widely drafted; and
  • just because there is a mobility clause in the contract it does not mean that it is automatically fair to dismiss an employee who refuses to comply with an instruction to relocate.

Therefore, employers should be aware of the pitfalls and risks when seeking to invoke mobility clauses and always act reasonably in doing so.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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