The Court of Appeal has upheld the EAT’s decision in British Gas Trading Limited –v- Lock and Another (2016) EWCA, CIV 983 that the Working Time Regulations 1998 should be interpreted to provide that results based commission should be included in Statutory Holiday Pay derived from the Working Time Directive.

The Facts

Mr Lock was employed by British Gas Trading Limited as an internal energy sales consultant. He received a basic salary plus commission on the sales he achieved. The commission made up approximately 60% of his remuneration and was based on results only; it did not depend on how much work was done.

During a period of statutory annual leave, Mr Lock was paid his basic salary plus the commission from previous sales that happened to fall due during the period.

As Mr Lock had normal working hours, his holiday pay only included basic salary and not commission. The commission he received in the months after a holiday would therefore be lower because he had not secured sales generating commission while he was on holiday.

Mr Lock brought a claim in an employment tribunal arguing that the reduced income amounted to a breach of the Working Time Regulations 1998. Mr Lock’s claim was selected as the lead claim for a large number of results-based commission cases (60 claims in the East Midlands region and 918 claims in the rest of the country).

In the latest saga in this ligation, the Court of Appeal took the view that their decision was that contractual results based commission should be included in the calculation of holiday pay. The decision only relates to four weeks’ annual leave under the Working Time Regulations and not the extra 1.6 weeks or any additional contractual holiday entitlement. The court expressly opted out of addressing the question of the appropriate reference period to calculate the commission element of statutory holiday pay.

What Happens Next?

It is understood that British Gas intends to apply for leave to appeal to the Supreme Court. It is said that the Supreme Court will take the opportunity to provide greater clarity for employers on this issue.

What about Brexit?

It is unlikely that Brexit will lead to the government adopting a different position regarding holiday pay as the government has already stated that it is committed that “existing workers’ legal rights will be guaranteed”.