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Holiday Pay – is this the end of the issue?

23/02/2016 | Adam Gray

The Employment Appeal Tribunal (“EAT”) has rejected British Gas’ appeal and upheld the Employment Tribunal Judgment in Lock v British Gas Trading Limited. The Employment Tribunal, following a European Court decision, decided that employers must pay holiday pay comprising basic salary and commission, if both are earned as part of an employee’s normal remuneration.

Previously the law was unclear as to whether commission, if earned as part of an employee’s normal remuneration, should be included in an employee’s holiday pay. Article 7 of the EU Working Time Directive 2003/88/EC (the “WTD”) provides: “Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks”. Domestically, the Working Time Regulations 1998 SI 1998/1833 (“WTR”) implemented this into UK domestic law. Mr Lock argued that his paid annual leave should include an element of his commission.

Mr Lock was employed by British Gas as a salesman and the amount of commission he earned was significantly more than his basic salary. Part of his role was to attempt to secure new customers on to British Gas contracts. If he successfully secured new customers he received commission. However, when Mr Lock went on holiday his holiday pay was comprised only of his basic salary. He challenged British Gas on the basis that not paying commission in his holiday pay breached his rights under the WTR.

The European Court held that European Law requires that a worker’s holiday pay should include an element of commission if that worker would have earned that commission had he not been on annual leave. The ET and now the EAT have, following the Judgment of the European Court, decided that Mr Lock was entitled to such commission payments in his holiday pay.

The EAT accordingly dismissed the appeal; mainly on the basis that it considered it acceptable to imply necessary words into the WTR to comply with EU law. Following the reasoning given in the sister case of Bear Scotland (which dealt with a similar point re. the elements of holiday pay; but in that case in respect of guaranteed overtime), the EAT concluded that that was the correct decision.

So, is the issue finally settled? We’ll have to see whether British Gas seek leave to appeal this decision. Watch This Space.

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