The Court of Appeal has handed down its decision in the case of ‘British Gas -v- Lock’. This is a fairly long running case and it is significant for employers with regards to how holiday payments are made to employees. The case was previously heard at the Employment Tribunal, the Employment Appeals Tribunal and now the Court of Appeal, with each forum concluding that commission payments should form part of holiday payments.
The facts of the case
Mr Lock was a salesperson earning a basic salary with variable commission. Commission was payable to him when a customer started to purchase their gas from British Gas, this meant that no commission could be earned whilst Mr Lock was on holiday, which in turn meant that he would lose income. Mr Lock pursued a claim for unlawful deduction of wages in the form of unpaid holiday pay, which was successful in the Employment Tribunal, and also on appeal at the Employment Appeals Tribunal.
Article 7 of the Working Time Directive provides that member states must ensure that workers have the right to at least four weeks’ paid annual leave, it does not however, specify how statutory holiday pay should be calculated, which in theory is left to national legislation to decide.
The European Court of Justice held that “paid annual leave” in Article 7 means that workers on holiday should receive their “normal remuneration” and this includes commission payments.
The Court of Appeal’s decision
The latest decision in this case repeats the judgments previously handed down, namely that commission payments are payable. Therefore, nothing has changed!
The overall outcome……Good news for Employees?
This case is important for any employer that operates a commission scheme, or regularly makes other payments in addition to basic salary, for example overtime. The outcome confirms that when employers calculate holiday pay they should note that workers are entitled to be paid a sum in respect of any commission, or other elements they would have earned whilst working if they had not been on holiday.
Unfortunately, when it comes to guidance from the Court as to how an employer should calculate this sum, none was actually provided…. so we shall have to watch this space on any guidance to come at a later date. Peach Law shall provide you with any updates once available.
Should you require any advice on holiday pay please do not hesitate to contact out legal team on 0161 478 3800 or on [email protected]