Unlocking holiday pay: the latest EAT decision
Author: Sophie Macphail
Applies to: England, Wales and Scotland
The Employment Appeal Tribunal has ruled in the long-running case of British Gas Trading Ltd v Lock, confirming that commission payments need to be taken into account when calculating holiday pay.
We covered the previous developments in this case in our articles:
Holiday pay: Leicester employment tribunal fails to unlock all the answers
Holiday pay to include commission
Holiday pay: uncertainty continues
The story so far...
In 2012 Mr Lock complained to an employment tribunal that his employer's method for calculating his holiday pay was in breach of the Working Time Regulations 1998 (WTR). This was because the remuneration paid to him during holidays consisted only of basic salary and any commission which had been earned earlier but happened to be paid at that time. Since he was not working he could not earn any commission while he was on holiday.
The tribunal identified a conflict between the domestic, WTR and the EU Working Time Directive (WTD) and made a referral to the ECJ for a preliminary ruling.
The ECJ ruled that because commission was directly linked to the work that Mr Lock carried out and was a regular part of his pay, it should be included in the calculation of holiday pay under the WTD.
The case then returned to the tribunal to address the question of whether the WTR could be read as to give effect to EU law.
The tribunal decided that yes, the WTR could be interpreted in such a way that it included commission payments in the calculation of holiday pay in respect of the 20 days annual leave granted under the WTD.
The similar case of Bear Scotland & Others v Fulton & Others ruled that employers should take account of non-guaranteed overtime payments when calculating the basic 4 week holiday entitlement. The tribunal in Lock ruled that the same approach should be adopted.
It therefore found in Mr Lock's favour, holding that he had suffered an unlawful deduction of wages.
British Gas appealed this decision arguing that this case should be distinguished from the earlier EAT judgement in Bear Scotland and did not apply to commission payments.
The decision - where we are now?
The EAT dismissed the appeal and found that this case could not be separated from the decision in Bear Scotland and that the tribunal had been right to follow this decision. It further confirmed that non-guaranteed overtime should be included in the calculation of holiday pay.
The EAT commented that the present case did not concern any exceptional circumstances that justified a departure from its previous decision in Bear Scotland.
Following this judgement British Gas have announced they are seeking permission to appeal.
Where does this leave things?
This decision does not change the current landscape on holiday pay and indicates there will be further appeals on the subject. The case of Bear Scotland is also expected to go back to before the EAT this year. Many of the outstanding questions on holiday pay are yet to be addressed including what period should be used when calculating the average payment.
Employers should continue to assess how they calculate holiday pay and seek specialist advice before making any changes. With further appeals on the horizon this area of employment law remains uncertain and employers and practitioners alike await further developments.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.