Yesterday, Monday 22nd February, a decision was handed down in the long-running case of Lock v British Gas Trading Ltd, which was first brought to tribunal in April 2012.
The case involves Mr Lock – a British Gas salesperson – whose remuneration package included a basic salary plus commission however when he took annual leave, he would only receive basic pay, which was considerably less than his usual salary.
Lock argued that this was a disincentive to taking annual leave and lodged a claim with an employment tribunal, which referred the case to the European Court of Justice (ECJ).
The ECJ concluded that because his commission was directly linked to the work he carried out, it must be taken into account when calculating holiday pay. The case was then referred back to the UK tribunal to apply its ruling to UK law.
The subsequent tribunal decision, which was handed down last March, found in favour of Mr Lock, and also applied an extra clause to the Working Time Regulations 1998 to make them comply with the Working Time Directive.
In a similar case, Bear Scotland v Fulton, the EAT ruled that UK law must be interpreted in a way that conforms to EU law by requiring employers to take into account non-guaranteed overtime payments when calculating holiday pay. The tribunal in the Lock case ruled that the same approach should apply to commission.
British Gas appealed, claiming it would be “judicial vandalism” to follow the ECJ’s recommendations and interpretation of the Working Time Regulations. The EAT yesterday dismissed this appeal.
The EAT decision will influence the outcome of thousands of other pending holiday cases, and will force employers to review their current holiday pay allowances in relation to elements such as overtime and commission.
Unhelpfully, however, it is not clear whether the wording proposed by the tribunal is completely settled; in particular, the tribunal had said that the issue of the reference period was to be determined at a later date. It is also not clear precisely how such a reference period would work, as commission paid in the 12 weeks before the calculation date will not be paid entirely in respect of hours worked during those 12 weeks; it may be necessary to average the pay over a different period.