We can confirm that the recent Employment Tribunal decision in the Lock v British Gas Trading Limited case has been appealed by British Gas.
As you will no doubt be aware, the case concerns the issue of including commission in the calculation of holiday pay. In March this year the Tribunal concluded that domestic legislation (the Working Time Regulations 1998 or WTR) should be read to make them compliant with EU law.
British Gas is appealing 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 Employment Appeal Tribunal (EAT) in Bear Scotland incorrectly concluded that our domestic legislation could be interpreted to give effect to EU law.
Although the Tribunal decision was unpopular with employers – because it held that commission should, in principle, be factored into the holiday pay calculation – we have been waiting for further guidance on the specific method of including commission when calculating holiday pay. The impact of the Lock appeal will mean a significant delay until a final decision on the issue is reached, which will lead to a further period of uncertainty for employees and employers alike. Whilst the EAT cannot overturn the Bear Scotland case itself, it could lead to a decision which conflicts with the Bear Scotland judgment.
The appeal outcome could therefore impact 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. Therefore any eventual outcome is unlikely to be any worse for employers than the current position.
If you have ongoing or threatened litigation on holiday pay or commission, this latest appeal may provide a good tactical opportunity to request a further stay of proceedings. For those with commission structures in place, this will lead to a further period of uncertainty, whilst the appeal progresses, about whether commission should actually be factored into holiday pay or not. However, we recommend a conservative approach is maintained (and consideration of ensuring that there are relevant accruals in the financial accounts for any potential liability) as there is still a binding European decision which says that, in principle, commission should be taken into account when calculating holiday pay.
For further holiday pay blogs visit our holiday pay hub