The Employment Appeal Tribunal (EAT) is to be asked to look again at holiday pay, after British Gas lodged an appeal last week against the recent Employment Tribunal decision in the Lock case. The appeal is of great importance to many employers and raises the question of whether British domestic law can be interpreted ‘purposively’ so as to give effect to recent EU cases which say that holiday pay under the European Working Time Directive must take account of elements of normal pay such as commission. 

In October 2014 the EAT ruled, in the case of Bear Scotland v Fulton, that EU law can be read across into the Employment Rights Act 1996 so as to require employers to take into account non-guaranteed overtime payments when calculating pay for the basic four week holiday entitlement under regulation 13 of the Working Time Regulations 1998. In March this year the Employment Tribunal reached the same conclusion in relation to commission in the Lock case. British Gas is now appealing that decision on two grounds:    

Commission and non-guaranteed overtime are dealt with under different provisions, which use different language, and the Tribunal incorrectly concluded that Bear Scotland, a case about overtime, had any bearing on the outcome of Lock.   

  1. In any event, the EAT in Bear Scotland incorrectly concluded that our domestic legislation could be interpreted purposively to give effect to EU law.
  2. The appeal could, therefore, affect claims that involve payments other than commission, including overtime cases. However, the Lock appeal will not challenge the ‘three month gap’ rule, which the EAT identified in Bear Scotland: that ruling will be undisturbed by this appeal. 

The appeal will probably be heard by the EAT towards the end of this year. Many thousands of other claims, against other employers in England, Wales and Scotland, were stayed pending the outcome of the Employment Tribunal decision in Lock. No doubt most of those employers will now be asking for cases to remain stayed until the EAT delivers its ruling. Indeed, in light of the ongoing uncertainty in this area, even those employers not currently involved in litigation would be well advised to take specialist advice before making changes to the way holiday pay is calculated or compromising actual or potential back pay claims.