In March, we reported on the outcome of the Lock -v- British Gas case, where the Employment Tribunal, following a decision referred to the European Court of Justice (ECJ), held that employers must take commission into account when calculating pay for holidays.

British Gas has now lodged an appeal against the Tribunal’s decision at the Employment Appeal Tribunal (EAT).

The background

Mr Lock, a sales consultant, claimed unlawful deduction of wages in the Employment Tribunal. Whilst he was on annual leave, he received his basic salary but did not earn commission; therefore, following annual leave, his pay was lower.

The issue of what is holiday pay was referred to the ECJ. The ECJ concluded that Mr Lock’s commission was directly linked to the work he carried out, and so must be taken into account when calculating holiday pay.

The Tribunal dealt with the issue by inserting new wording into Regulation 16(3) of the Working Time Regulations 1998 as follows:

‘(e) as if, in the case of the entitlement under Regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of Section 221.’

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 appeal

British Gas is appealing the decision on two grounds:

  1. Commission and non-guaranteed overtime are distinct concepts and as such, the Tribunal was wrong to conclude that Bear Scotland, which concerned overtime, had any bearing on the outcome of Lock.
  2. The EAT in Bear Scotland incorrectly concluded that the domestic legislation could be interpreted purposively to give effect to EU law (in other words, that the domestic courts have a fair amount of scope to alter, add to or construe the domestic legislation in order to implement the purpose of the EU law).

The appeal could also affect claims that involve payments other than commission, including overtime cases.

Comment

The appeal is not expected to be heard until late 2015. Therefore, there is a dilemma for employers as to whether to include non-guaranteed overtime and commission in holiday pay now, or await the appeal outcome (which itself may not be final).