Relocation redundancies and mobility clauses

Under Section 139 of the ERA, there is a redundancy situation where an employer needs fewer (or no) employees to carry out work “in the place in which they are employed”, usually due to business closure or relocation.

The case law on redundancy and relocation is confusing and unsatisfactory. In High Table Limited v Horst [1997] IRLR 513, the Court of Appeal said that whether or not fewer employees are needed in the “place where the employee was employed” is a question of fact, to be answered by looking at where the employee actually worked day-to-day. In that case, Ms Horst was still entitled to a redundancy payment when her employer relocated to new premises, even though her contract enabled her employer to force her to relocate. The Court said employers should not be encouraged to use mobility clauses in employment contracts to defeat genuine redundancy claims. The same result was reached in Bass Leisure v Thomas [1994] IRLR 104.

But a different decision was reached by the Court of Appeal in Home Office v Evans [2008] IRLR 59. Here, instead of declaring redundancies, an employer moving to new premises invoked a mobility clause entitling it to force employees to relocate. The Court of Appeal said that the employer could choose between invoking the mobility clause and making redundancy dismissals. Since it invoked the mobility clause, the dismissals were not because of redundancy but instead were for refusing to obey a lawful order to relocate, in breach of the employment contract. As a result, no redundancy pay was due. Employers who invoke a mobility clause late in the day, after already announcing a decision to make redundancies, are less likely to be able to avoid liability for redundancy payments in this way.

In any event, this case underlines how members must take great care if, instead of being made redundant, they are directed to work at a different location or branch. A refusal to move could result in dismissal for refusal to obey a lawful order to relocate, instead of redundancy. There is also a danger, even if there is no mobility clause in the contract, that the new role could be viewed as suitable alternative employment removing an employee’s entitlement to a redundancy payment (see Chapter 6).

Mobility clauses are subject to the implied duties of good faith, trust and confidence and must not be invoked arbitrarily or capriciously (United Bank v Akhtar [1989] IRLR 507). However, there is no obligation on the employer to act “reasonably” when enforcing a mobility clause, or to pay relocation expenses, unless these are provided for in the contract.

Mobility clauses, whether permanent or temporary, must always be expressly agreed and should be drawn to the attention of the employee when the contract is entered into. They should never be hidden away.