Yesterday the Employment Appeal Tribunal (EAT) dismissed the appeal by British Gas against last year’s Employment Tribunal (ET) finding that commission should be taken into account when calculating holiday pay. 

Background

Mr Lock was employed by British Gas as a salesman. He received a basic salary plus results-based commission (commission which did not depend on how much work was carried out). Mr Lock could not earn commission while he was on holiday and therefore lost income as a result of taking annual leave. Mr Lock brought a claim in the ET in respect of this ‘lost’ pay, which in turn made a referral to the European Court of Justice (ECJ).

The ECJ concluded that the EU Working Time Directive requires results-based commission to be taken into account when calculating an employee’s holiday pay. The case was remitted to the ET. 

The Lock case followed an earlier decision in the EAT in Bear Scotland Ltd and others -v- Fulton and others, which had concluded that regular non-guaranteed overtime should be included in holiday pay calculations. The ET, considering theLock case, found that there was no difference between non-guaranteed overtime and commission insofar as annual leave was concerned.  Accordingly, the ET agreed that holiday pay should take commission into account; it dealt with the issue by inserting new words into Regulation 16(3) of the Working Time Regulations 1998 so that the regulations could be interpreted in line with EU law. 

British Gas appealed. 

The appeal

British Gas argued that:

  1. Commission and non-guaranteed overtime are distinct concepts and as such, the ET was wrong to conclude that Bear Scotland had any bearing on the outcome of Lock;
  2. Further, Bear Scotland was wrongly decided and the EAT was not bound to follow it; and
  3. The ET was wrong to conclude that it was possible to interpret the Working Time Regulations 1998 in a way which is compatible with EU law. 

Decision

The EAT dismissed the appeal. Mr Justice Singh did not agree there was any basis in the terms of the relevant legislation to distinguish Bear Scotland from Lock and overtime from commission. Singh J commented that although the EAT is not bound by its earlier decisions, it will generally follow them unless there was an established exception. The EAT’s decision inBear Scotland was not manifestly wrong and there were no exceptional circumstances so a departure from it could not be justified. Singh J stated it was for the Court of Appeal, not the EAT, to decide whether Bear Scotland was wrongly decided. 

British Gas’s legal representatives have confirmed that it has asked for permission to take the case to the Court of Appeal for a definitive ruling. 

Comment

The judgment is not surprising given the recent flow of case law in this area, but it seems the uncertainty regarding holiday pay claims is set to continue at least in the short term. 

The Bear Scotland case is due to return to the EAT later this year after the employees challenged the finding that a gap of three months or more between underpayments could prevent historic claims being made. 

If there is an appeal to the Court of Appeal in the Lock case, as indicated, the outcome could affect the future calculation of holiday pay in terms of various payments including overtime as well as commission. However, it will take some time for an appeal to be concluded. 

In the meantime, employers face the continuing dilemma whether to include non-guaranteed overtime and results-based commission in calculations for holiday pay.