• Should results-based commission be included in holiday pay? In October 2016, in the case of Lock v British Gas Trading Ltd, the Court of Appeal decided that the Working Time Regulations 1998 (WTR) could be interpreted to include results-based commission payments in holiday pay. The Court of Appeal indicated that it had "wavered" in reaching its decision. It was, therefore, widely expected that a further appeal would be heard by the Supreme Court. However, on 28 February 2017 the Supreme Court refused British Gas' application for permission to appeal. The consequence of the refusal was that the Court of Appeal's decision stood and sums in respect of results-based commission may have to be included in the calculation of holiday pay for the first 4 weeks of holiday under the WTR. Although this development meant that the principle was settled, two important practical questions remain unanswered: (i) what is the correct reference period to be used when including results-based commission payments in holiday pay?; and (ii) when will a payment be considered sufficiently regular to warrant inclusion in holiday pay? Some employers may feel these uncertainties justify a continuation of a "wait and see" approach. However, where an employer decides to take this approach it would prudent to make provision to cover the cost of making adjustments in future. You can read our full report on the decision here.
  • Voluntary overtime payments must be included in holiday pay: in the case of Dudley Metropolitan Borough Council v Willetts and others the EAT upheld an Employment Tribunal decision that voluntary overtime, stand-by and call out payments must be reflected in holiday pay, provided such payments amount to "normal remuneration". Importantly, the EAT held that the worker does not have to be contractually obliged to carry out the work in order for the related payment to be included in holiday pay. This is the first binding decision on the inclusion of voluntary overtime payments in holiday pay. However, as highlighted above, uncertainties remain as to how such an adjustment should be effected in practice. First, what reference period should be used? In the absence of any guidance from the Tribunals or the Government, employers will have to make their own judgement on what reference period to use. In this context, it is worth noting that the recently-published Taylor Review recommended the use of longer reference periods for workers with irregular hours. However, it is unclear if, or when, this proposal will be taken forward. Second, when is payment to be considered sufficiently regular to warrant inclusion? The EAT Judge suggested a payment once every four or five weeks would meet the threshold if paid over a sufficient period of time. But how irregular does a payment have to be to fall out of scope (e.g. is once a year, every year, regular or irregular)? Again, employers will have to make their own judgement on whether a payment is in or out of scope. You can read our full report on the decision here.
  • Worker entitled to payment in lieu of accrued leave for whole period that the right to take paid leave was denied, potentially up to 13 years: in the case of King v The Sash Window Workshop the ECJ ruled that workers who are denied the right to take paid annual leave are entitled to bring claims in respect of accrued but untaken leave. There is no requirement on them to take the leave on an unpaid basis in order to bring a claim. Further, the right to paid annual leave for such workers accrues and carries over without limitation. In this case, it meant the worker could potentially recover a payment in lieu of 13 years' worth of untaken holiday. This case has important implications for employers who have not yet adjusted holiday pay to include variable payments such as overtime and commission. It is also of concern to employers who engage individuals on a self-employed basis but who could be deemed to be "workers" for employment law purposes. You can read our full report on the decision here. The case will return to the Court of Appeal in 2018.