In the latest installment of Lock v British Gas Trading Ltd, the Employment Appeal Tribunal (EAT) has dismissed the appeal raised by British Gas against the decision that Mr Lock's statutory holiday pay should include results-based commission. In doing so the Employment Appeal Tribunal has followed the approach adopted in a similar previous case of Bear Scotland v Fulton.
The Facts of the Case:
Mr Lock was employed by British Gas as an internal sales consultant. He received a basic salary plus commission on the sales that he achieved. The commission made up approximately 60% of his pay and was based solely on sales.
Mr Lock took annual leave in December and during this time was only paid his basic salary plus the commission from previous sales that happened to fall during this time. Overall, Mr Lock suffered a reduced income following his annual leave because he was unable to secure any sales while he was on holiday.
Mr Lock brought a claim in the Employment Tribunal, claiming that the reduced income amounted to a breach of the Working Time Regulations (WTR) 1998.
The case was referred to the European Court of Justice (ECJ) which held that if commission payments are not taken into account, the worker will be placed at a financial disadvantage and might be deterred from exercising their right to annual leave – which would be contrary to the purpose of the Working Time Directive.
Following the EJC's decision and the EAT's decision in Bear Scotland v Fulton, which held that overtime pay could be included in holiday pay calculations, the case was remitted back to the Employment Tribunal.
The Tribunal adopted the approach in Bear Scotland and held that results-based commission pay could be included in holiday pay calculations. British Gas subsequently appealed the decision arguing that Bear Scotland should not be followed as the facts of this case were different. Particularly, that this case sought to include commission rather than overtime pay within the holiday pay.
The Employment Appeal Tribunal (EAT) upheld the Tribunal's decision and dismissed British Gas's appeal. The Employment Appeal Tribunal (EAT) was satisfied with the approach taken in Bear Scotland and the Judge could see no reason to depart from the reasoning in that case as both cases concerned aspects of pay.
The Employment Appeal Tribunal decision confirms that the WTR 1998 should be interpreted to conform with the requirements of EU law to include results-based commission when calculating holiday pay. Whilst employers now know they must take commission and overtime into account when calculating holiday pay, the Tribunal have not offered any practical guidance on how to calculate these payments.
It is understood that British Gas are seeking permission to appeal The Employment Appeal Tribunal (EAT) decision to the Court of Appeal as this is a test claim for an estimated 918 results-based commission cases. Its outcome will certainly be far reaching and one for both employees and employers to follow.
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