The judgment of the Employment Appeal Tribunal (EAT) has been handed down today (22 February) in the case of  Lock v British Gas and has been determined in favour of Mr Lock and his colleagues. The long awaited decision has been watched closely by employers and workers alike and is likely to have implications for many other employers and workers who are paid commission.

By way of reminder, the Lock case concerns whether employers are obliged by the Working Time Regulations 1998 (WTR) to take into account commission payments when calculating holiday pay. A significant number of claims have been stayed pending this decision, however, it should be noted that British Gas has sought leave to appeal, which if successful, will mean a further delay on clarity in this area until at least next year.

The technical arguments submitted by British Gas included:-

That the Lock case was distinguishable from the case of  Bear Scotland v Fulton (concerning overtime, rather than commission) because there is express statutory provision for non-guaranteed overtime, in the Employment Rights Act 1996, whereas there is no express provision which applies to results based commission cases like the Lock case. This ground of appeal was rejected on the basis that there was no way of distinguishing the principles applied in the Bear Scotland case from the current case and no statutory language that would lead to different results in the two contexts.

The second main argument was that the old case of Bamsey was still binding on the Appeal Tribunal. However, this was also rejected as a result of the significant development of this area of law in more recent years, particularly the Williams v British Airways decision, which was the first in the line of cases to hold that any work that was carried out which was intrinsic to the worker’s role should be taken into account for the purposes of calculating holiday pay. There were no other grounds on which the EAT considered that it was appropriate to depart from the Bear Scotland decision.

Mr Justice Singh, presiding, concluded his judgment by saying that if Bear Scotland was wrongly decided, then it must be for the Court of Appeal to say so, not for him, sitting in the Appeal Tribunal. If British Gas succeeds in its application for appeal, then the Court of Appeal may well have to make that call, but that is unlikely to be for some time.

Next steps for employers

If leave to appeal is refused then it is likely that this case will once again be remitted to the Employment Tribunal to apply this decision to the specific facts of the case, which will hopefully provide some practical guidance on how holiday pay should be calculated to appropriately factor in commission payments in these circumstances. If you are an employer who pays commission, or indeed you are still not taking overtime into account when calculating holiday pay you should seek advice and quantify your potential risk in light of this decision.