Un”locking” the door on holiday pay… December 2015 update

Posted 14/12/2015 By: Claire Sleep

The case of Lock –v- British Gas Trading Limited was heard at the Employment Appeal Tribunal last week and it is likely that it will take a couple of months for the decision to be reached. The decision should bring more clarification on commission and holiday pay.

Followers of this case will recall that Mr Lock, in proceedings before the Leicester Employment Tribunal, was seeking holiday pay to be assessed on the basis of his commission earnings as well as his basic salary. The policy of British Gas was only to take the basic salary into account.

Last year, the EAT in Bear Scotland –v- Fulton decided that the Working Time Regulations could be read as giving effect to EU law so as to require employers to take into account guaranteed overtime as well as non-guaranteed overtime payments worked for a sufficient period of time in order for the overtime to be ‘normal’, when calculating holiday pay. There remains some uncertainty over whether voluntary overtime should also be included.

In Lock, a referral was made by the Tribunal to the European courts who determined that if a worker’s remuneration includes contractual commission, the Working Time Directive does prevent a national law from calculating holiday pay based on basic salary alone. This is because it was decided that holiday pay should include commission intrinsically linked to the performance of a worker’s tasks and holiday pay calculations should not work against the objective of the WTD to allow employees to take holiday in order to preserve their own health and safety (i.e. workers would not take holiday as they could not afford to not earn commission).

Following on from this, the Employment Tribunal followed the approach in Bear Scotland and decided that an extra paragraph should be read into the Working Time Regulations – “a worker with normal working hours whose remuneration includes commission or similar payments shall be deemed to have remuneration which varies with the amount of work done”. This extra wording means that workers could have commission as well as basic salary taken into account calculating their holiday pay.

This decision was promptly appealed by British Gas on the basis that commission and non-guaranteed overtime are dealt with under different provisions, which use different language, and the Tribunal incorrectly followed Bear Scotland which was a case about overtime. The second ground of appeal is that the EAT in Bear Scotland incorrectly concluded that our domestic law could be interpreted purposively to give effect to EU law.

It does appear clear to us that the European courts are of the view that employees should not in any way be prevented from taking holiday as this is a clear health and safety requirement. Therefore it does appear that British Gas will find it difficult to succeed in their appeal. Employers should therefore be advised to watch this space in terms of the case law.

Should you require any further advice in relation to action to be taken now, please get in contact with Claire Sleep of Ashtons Legal (Claire.sleep@ashtonslegal.co.uk and 01223 431094)