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Holiday pay and commission – issues to be discussed in the forthcoming appeal in Lock v British Gas

The case of Lock v British Gas Trading Limited will be heard by the Employment Appeal Tribunal (“EAT”) on the 8th and 9th of December, hopefully bringing employers a step closer to certainty over the position regarding commission and holiday pay.  In light of this, it is worth considering the developments so far and what answers we can expect from the EAT.

Calculating holiday payDecision of the Employment Tribunal in Lock

Following the Bear Scotland v Fulton decision, we now have clarity that non-guaranteed overtime must be included when calculating holiday pay.

In Lock, the Employment Tribunal asked the Court of Justice of the European Union (“CJEU”) whether the Working Time Directive (“WTD”) required commission payments to be included in holiday pay. The CJEU held that, where a worker’s remuneration includes contractual commission, determined with reference to sales achieved, the WTD precludes a national law that calculates statutory holiday pay based on basic salary alone. This could deter employees from taking annual leave and would be contrary to the Directive’s purpose.

In response to this, the Employment Tribunal adopted the approach taken in Bear Scotland and held that an additional paragraph should be read into the Working Time Regulations (“WTR”). This paragraph stated that “a worker with normal working hours whose remuneration includes commission or similar payments shall be deemed to have remuneration which varies with the amount of work done”. On this basis such employees would be entitled to have commission taken into account when calculating their holiday pay.

The Appeal

This decision has been appealed by British Gas on two grounds:

1. That commission and non-guaranteed overtime are dealt with under different provisions, which use different language, and that the Tribunal incorrectly concluded that the Bear Scotland case, about overtime, was relevant to the outcome of Lock.

2. In any event, the EAT in Bear Scotland incorrectly concluded that our domestic legislation could be interpreted to give effect to EU law.

The appeal will likely involve more technical arguments around the application and interpretation of EU law in the UK. In our view, British Gas has a significant hurdle to overcome to convince the EAT to make a finding against a binding European decision.

Questions Remaining

Even if British Gas succeed in their appeal, that is unlikely to be the end of this saga. The forthcoming appeal will not deal with the practical aspects such as appropriate reference periods or how to quantify a claim for the commission element of holiday pay, so employers will have to wait a little longer for guidance on these issues when the case is remitted back to Tribunal.

The DWF employment team will be tweeting live from the two day appeal hearing on the 8th and 9th of December. If you would like to keep up to date with events as they unfold please follow us on Twitter, our username is @DWF_Employment

 

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further