The Court of Appeal (CA) has published its decision in the case of British Gas Trading Limited v Lock.

In a nutshell, the CA agreed with the previous decision of the EAT and held that Mr Lock’s holiday pay must include an element to compensate him for any contractual results-based commission that he would ordinarily have earned if he were not on holiday.

The key points of the CA’s decision were:

  1. that it was possible to insert new wording into the UK’s Working Time Regulations 1998 so that the calculation of holiday pay for the typical 4 weeks’ “Euro” leave would include contractual results-based commission (in line with EU case law). This interpretation was permissible as it went with the grain of the legislation.
  2. that the key focus under Article 7 of the Working Time Directive is ensuring that a worker receives “normal remuneration” when on leave.
  3. the parties discussed some difficult borderline situations such as annual bonuses or commission schemes where the worker has to hit a threshold before earning any commission. However, the CA declined to give guidance on how to deal with such situations. Neither was guidance provided, in general terms, as to either what constitutes “normal remuneration” or the correct reference period to use, although the CA approved the methodology applied by the Employment Tribunal that a 12-week reference period was the correct period for this particular case.

British Gas has sought leave to appeal to the Supreme Court. Given the importance of this case, and the CA’s comments about how difficult the issues were (the judge giving the leading judgment stated that he did not find this question easy and that he had wavered between the two outcomes), we would expect leave to appeal to be granted.

This case is important to any employer that runs a commission scheme where the level of commission received is adversely affected if a person takes holiday.